UFPLS – Uncrystallised Funds Pension Lump Sum

UFPLS offers the option for pension savers aged 55-75 to access their entire pension fund as one lump-sum where no benefits have been taken from that fund previously. This change introduced in April 2015 supersedes trivial commutation which allowed smaller funds to be completely decanted in one sitting.

The main drawback of this situation is that 75% of the fund value will be added to the investors income position for the year and income tax paid at marginal rates thereon. Taking benefits in this way will also reduce the individual’s annual allowance to £10,000 meaning that any future pension contributions in excess of this will not attract tax relief.

UFPLS may be a solution for those with smaller pension funds with providers that do not offer flexi access drawdown and the cost of moving to a provider who does is inhibitive. The main drawback with UFPLS is tax as noted above and caution should be exercised to gauge the tax ramifications before putting pen to paper. For those looking to partially access funds from a pension policy, ‘smaller pots’ legislation will likely allow for more flexibility if less than £30,000 is required.