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‘UFPLS’ – Taking your pension pot as cash

‘UFPLS’ – Taking your pension pot as cash

Since the ‘freedom and choice’ pension changes in 2015, FuturePlanner has allowed members to take a single UFPLS at retirement. UFPLS stands for Uncrystallised Funds Pension Lump Sum and the option allows you to take retirement savings as taxed cash if you wish. UFPLS is in addition to the option to take 25% of your pot as tax-free cash.

The option can work well for members who have smaller pots which are difficult to turn into a regular income.

However, unless the pot really is small, you still need to be careful about tax if you take an UFPLS. This is because your pot of cash is added to all the income you earn in that tax year – hence, if it puts you into a higher tax bracket, you could pay a lot of extra tax.

To help in this situation, FuturePlanner now allows members a maximum of two UFPLS payments from their retirement account, provided that:

  • both withdrawals are taken within 24 months of the completion of the final retirement option forms. This allows members the option of taking their two payments across a maximum of three tax years.
  • members sign a declaration to confirm that they permit the Trustee to automatically settle any remaining benefits after 24 months has passed. This is to ensure that money does not get forgotten and left behind in FuturePlanner. Details of this will be made clear to the member in the retirement communications.

The treatment of UFPLS is not the only tax issue to be careful with. Taking an UFPLS also means that, if you ever wish to pay into a pension scheme again, you will be restricted to a maximum of £4,000 per annum. Please see the Annual Allowance factsheet