UFPLS (Uncrystallised Funds Pension Lump Sums) is a way of taking some or all the money from your pension which has not yet been crystallised (i.e. is not yet in drawdown, been spent or used to buy an annuity). 25% of each UFPLS payment will be tax free and the remaining 75% will be subject to income tax at your marginal rate (although initially this could be taxed more heavily under an ‘emergency code’ under PAYE in which case you need to reclaim any excess from the tax office)

Care needs to be taken in terms of tax planning and sustainability of income. Large withdrawals could mean paying unnecessary tax and will naturally reduce the amount available to provide an income in the future.

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Who should consider UFPLS?

With other flexible retirement income options available, it’s likely UFPLS will only be suitable for a few people, for example if it’s a small pension pot and you need the money to clear off or reduce expensive borrowings. However, those who want to take some cash from their workplace pension scheme whilst remaining a member, may want to consider it if the scheme offers this as an option. We recommend you seek advice before considering UFPLS.

Furthermore, it should be remembered pensions are highly tax efficient and flexible under the new pension rules – it will be very difficult to find a more productive place to keep your money and if you are at all unsure, please seek advice before making your decision (visit www.pensionwise.gov.uk or call 030 0330 1001 for additional information).

Phased retirement strategies can be highly efficient and tax effective, particularly where the full tax-free cash is not needed or where someone is gradually retiring and looking to supplement earned income with pension income

Phased strategies allow you to activate your pension fund in staggered phases and set up a series of annuities or drawdown arrangements over a period of time. Under this method, you can take a tax-free cash sum of up to 25% at each phase together with a taxable income. Your remaining pension fund continues to be invested and benefit from a favourable tax environment.

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