I would like to draw a monthly UFPLS from my SIPP, do you know any providers who offer this and/or monthly tax free cash?
23 February 2022
Question by Cathy
Hi, I would like to draw a monthly UFPLS from my SIPP - do you know any providers who offer this and/or monthly tax free cash?
Thanks very much
Answered by Bodie Dove
Thank you for your question.
I would ideally like to better understand your reasoning for considering the UFPLS route for your withdrawals, but I have included some general information for you below.
Flexi-access is almost always the preferred solution because it allows a very high degree of flexibility about the way you can draw your pension. You can draw some or all of the tax-free pension commencement lump sum without drawing the income at the same time, you can draw some or all the income without taking the PCLS or you can take some of each. Broadly speaking when you draw any PCLS, you have to designate three times the amount for drawdown – but you do not take it at the time.
In contrast, UFPLS is simple but inflexible. If you draw tax-free PCLS, then you have to draw three times the amount at the same time in the form of taxable income. So £1,000 of PCLS is coupled with £3,000 of pension income taken simultaneously.
The tax treatment of death benefits of the funds are the same either way, regardless of whether they have been crystallised for drawdown. The death benefits are tax free if the member has died before reaching the age of 75. However, if death takes place at age 75 or later, the funds are still free of inheritance tax but may be subject to income tax on the recipient.
There is one situation in which UFPLS it is as good as flexi-access and might even be superior in some circumstances, that is where the individual wants to take tax-free cash and income together at the same time. The most common situation is likely to arise where the client wants to draw the whole of their pension pot at once. In such a situation, the UFPLS solution might sometimes be cheaper than the flexi-access solution, especially if it does not involve the expense of making a transfer to another scheme.
Everything that can be done through UFPLS is available with flexi-access and with a lot more choice as well.
For someone who is contemplating drawdown as a long-term income strategy, flexi-access is the obvious solution. They can choose to have income in years when their tax rates are low and tax free PCLS (if there is any left) in years of high income and tax.
Please don't hesitate to contact me for further assistance.
Chartered Financial Planner
I’ve always enjoyed problem solving and I take a personal approach to finding solutions that provide a genuine, positive change to my clients. I am passionate about attaining the best approach to help each client understand and then take control of their finances so that they can create a plan to fund their future goals. I like to think of myself as the satnav helping them to get from point A to Z on their financial journey.