UK PENSION FLEXI ACCESS DRAWDOWN, UFPLS & SMALL POTS and the tax implications...

UK PENSION FLEXI ACCESS DRAWDOWN, UFPLS & SMALL POTS and the tax implications...

Taking taxable income is likely to have an impact on how other sources of income are taxed. So you need to think about how much you want to withdraw and how that withdrawal will be taxed!

Pension flexibility, introduced in April 2015, provides those wishing to access their pension funds with a wide choice of vesting options. But which option do they select?

⏰CONTENT
0:00 - Introduction
0:59 - Flexi Access Drawdown
1:31 - Tax on Flexi Access Drawdown
1:54 - MPAA
2:17 - UFPLS
3:29 - Tax on UFPLS
3:51 - Example of tax on UFPLS
5:01 - Emergency tax likely on an UFPLS
5:34 - Small Lump Sums
7:09 - Example of Small Lump Sums

Obviously this is a decision that has to be thought through carefully and hopefully this will provide some clarity on those options.

Using flexi-access drawdown, a pension holder can crystallise their pension fund, usually taking up to 25% of it as a Pension Commencement Lump Sum (PCLS) while the balance of the money continues to be invested. These are then known as crystallised funds.

Withdrawals can be taken as a regular income stream, or one or more lump sums.

UFPLS very simply is a way of taking cash lump sums from a pension without purchasing a product. 25% of the UFPLS is normally tax free and the rest is taxed at marginal rate.

Importantly, with this, emergency tax will normally apply to the first payment.

If you do end up overpaying tax then it is possible to reclaim this via HMRC in the same tax year otherwise HRMC will calculate whether you have over paid or underpaid tax in the following year.

My channel is for information and education purposes only. Any information or guidance given does not act as financial advice. Please consult a financial adviser if you are unsure in anyway.

⭐My aim is to provide education and guidance to help individuals understand pensions, investments and protection.

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