What is an Uncrystallised Funds Pension Lump Sum (UFPLS)?

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An Uncrystallised Funds Pension Lump Sum (UFPLS) is one of the main ways to access money from a defined contribution pension from age 55 (rising to 57 from April 2028), alongside flexi-access drawdown and buying an annuity. **How it works** Unlike drawdown, where you first designate a portion of your pot into a separate drawdown account before deciding how much taxable income to take, a UFPLS is a single, combined payment taken directly from your uncrystallised pot. Each time you take a UFPLS: - **25% of the amount withdrawn** is paid tax-free - **75% of the amount withdrawn** is taxed as income at your marginal rate, added to your other income for the tax year **Worked example** James takes a £20,000 UFPLS payment from his pension pot. - Tax-free element: 25% x £20,000 = £5,000 - Taxable element: 75% x £20,000 = £15,000, added to his other income and taxed at his marginal rate (20%, 40%, or 45% depending on his total income for the year) If James has no other income that year, the £15,000 taxable portion would use up most of his Personal Allowance (£12,570) with only £2,430 taxed at 20% = £486. **UFPLS vs drawdown** The key difference is flexibility. With drawdown, you can take the 25% tax-free cash from a tranche without taking any taxable income at the same time, and you can vary how much taxable income you draw in future years from the same crystallised pot. With UFPLS, every payment is locked into the fixed 25%/75% split -- you cannot take tax-free cash on its own using UFPLS. **MPAA trigger** Taking a UFPLS (beyond the first small-pot exemptions) triggers the Money Purchase Annual Allowance (MPAA), reducing your future tax-relieved pension contribution limit from £60,000 to £10,000 a year, with no carry-forward available against the MPAA. This is identical to the drawdown trigger. **Restrictions** You cannot take a UFPLS if you have primary or enhanced protection with protected tax-free cash rights above 25%, or in certain cases involving safeguarded benefits or guaranteed annuity rates -- these require conversion to drawdown or specific advice first. **Emergency tax risk** Because pension providers often do not hold an up-to-date tax code for a first UFPLS payment, HMRC's PAYE system frequently applies an emergency "Month 1" tax code, which can significantly over-tax a large one-off withdrawal. You can usually reclaim the overpaid tax faster using HMRC form P55 rather than waiting for the automatic year-end reconciliation.

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