Interactive Investor

Lump sums (UFPLS)

A flexible way to take your pension income, as and when you need it.

What is UFPLS (uncrystallised funds pension lump sum)?

UFPLS is a way of taking lump sums from your pension. It's flexible - you choose how much you want to take each time.

25% of every lump sum is tax-free, while the other 75% is taxed as income. The remaining money in your pension pot is not moved into drawdown – but can be at a later date.

Any part of your pension which has been ‘crystallised’ (moved into drawdown) cannot be taken as an UFPLS. 

How is an UFPLS taxed?

When you take an UFPLS, 25% is tax free and 75% is taxable income. 

For example, taking an UFPLS of £10,000 means that only £7,500 would count as taxable income. The other £2,500 would be tax free.

It is important to understand how the amount of income you take can affect the amount of Income Tax you will pay. Spreading this over several tax years could reduce your tax bill.

For example, taking a large UFPLS could get you close to your tax free personal allowance. Going over that limit would mean you pay income tax on any further income.

UFPLS payments could also raise your taxable income from a basic rate to a higher rate in a single tax year.

One option is to take your pension income in stages and plan according to your circumstances.

ii won't charge you for taking UFPLS or for using any other income withdrawal options.

When can I take an UFPLS? 

You can take an UFPLS as soon as you are able to access benefits from your pension (currently when you turn 55). 

There is no limit to the amount of times you can take lump sums from your pension. As long as you have funds remaining which have not been moved into drawdown, you can take an UFPLS.

What is the difference between UFPLS and drawdown?

Drawdown allows you to keep your money invested while withdrawing money when you need to. Whether you choose drawdown or an UFPLS, you can take 25% of your pension as tax-free cash. 

The following gives an example of each option with a £100,000 pension pot. 

Drawdown (entire fund)

  • Take 25% (£25,000) as tax-free cash.
  • Move remaining 75% (£75,000) into drawdown (taxed as income when withdrawn).

Flexi-access drawdown (part of your fund)

  • Move a portion (eg £20,000) of your pension pot into drawdown.
  • Take 25% (£5,000) of that portion as tax-free cash. The rest (£15,000) goes into drawdown (taxed as income when withdrawn).
  • Remaining pension pot (£80,000) is available to move into drawdown or take as an UFPLS.

UFPLS (uncrystallised)

  • Take a portion (eg £20,000) of your pension as cash.
  • Receive 25% (£5,000) of that portion as tax-free cash. Take 75% (£15,000) as taxed income.
  • Remaining pension pot (£80,000) is available to move into drawdown or take as a UFPLS.

Can I still pay into my pension after taking an UFPLS?

Taking an UFPLS triggers the Money Purchase Annual Allowance (MPAA) which reduces your annual allowance for pension contributions to £4,000.

How to take UFPLS (lump sums) from your ii SIPP

  • You’ll need to follow the process every time you want to take a lump sum.
  • The process comprises of 4 steps and requires you to complete and return a number of forms to us.
  • It could take up to 8 weeks to complete the process and for you to receive your lump sum.
  • The easiest way for you to return a form is through the secure message service via your online account.
  • Alternatively, you can still return a form via post but this may increase the time it takes to complete the process.
  • The process will be moving online in late 2021.

Step-by-step guide

Step 1

Please download and complete the Taking Pension Benefits form and return to us by either: 

Step 2

Benefits Questionnaire. 

Once we’ve received and processed your Taking Pension Benefits form, we’ll send you a Pre-Retirement pack including a questionnaire to complete.

When the pack is available, we’ll alert you by email to a secure message containing details of what you need to do.

This will be uploaded to the 'my SIPP documents' section of your online account. You can access it by logging in and selecting Account > Document history.

Please download, complete and sign the questionnaire. Then return to us using one of the methods detailed in step 1.

Step 3

Benefits Confirmation.

Once we’ve processed your questionnaire, the final step is to confirm the benefits you’re taking by completing a pack containing the Benefit Confirmation and Lifetime Allowance forms (including declarations).

When the pack is available, we’ll alert you by email to a secure message containing details of what you need to do.

Again, the pack will be uploaded to the ‘my SIPP documents’ section of your online account and will contain links to the forms.

Please click on the links to download the forms.  Then complete and sign both forms.  Return to us using one of the methods detailed in step 1.

Step 4

Benefits Paid.

Please note that you may be charged an emergency tax rate when you withdraw a taxable lump sum from your pension if: 

  • Your pension provider has not received confirmation of your tax code from HMRC. 
  • You haven’t been able to provide a current P45.

The emergency tax code assumes that you will carry on receiving the same amount each month even if the money you are taking is a one-off withdrawal. On an emergency tax code, you will also only receive 1/12th of your tax-free personal allowance.

This may mean you pay more tax than is actually due. You can reclaim emergency tax on pensions by contacting HMRC directly.

There is no additional fee for taking lump sums from your pension - it's all covered by your monthly SIPP fee.

Important note
Making decisions about how to use your pension to meet your income requirements is not easy. If you have any questions, we recommend speaking with Pension Wise, a service from MoneyHelper, or an independent financial adviser.


Small pots (SIPP value up to £10,000)

If you have a small pension fund worth up to £10,000, you can take this as a lump sum. This does not affect your Lifetime Allowance.

To withdraw a small pot pension, please complete a Taking Pension Benefits form and return by secure message.

Open a SIPP today and pay no SIPP fee for six months

This means your service plan fee of £9.99 covers you for all of your investment accounts. Following the offer period, the ii SIPP fee is only £10 a month more, and could save thousands compared to other pension providers who charge a percentage fee.  Terms apply

Please remember, SIPPs are aimed at people happy to make their own investment decisions. Investment value can go up or down and you could get back less than you invest. You can normally only access the money from age 55 (57 from 2028). We recommend seeking advice from a suitably qualified financial advisor before making any decisions. Pension and tax rules depend on your circumstances and may change in future.