What is an Uncrystallised Funds Pension Lump Sum?
Updated 14 December 2016
An Uncrystallised Funds Pension Lump Sum (UFPLS) is an ad hoc lump sum drawn from your uncrystallised defined contribution pension pot. Typically, 25% of the lump sum will be tax free with the remainder being subject to income tax.
For example you could take a £10,000 lump sum from your uncrystallised pension fund with £2,500 being paid tax free and the remaining £7,500 being paid as pension income and subject to income tax at marginal rate. This option leaves any remaining pension fund in this part of your pension uncrystallised. Taking an UFPLS will result in your money purchase annual allowance (MPAA) being reduced to £10,000, if this hasn’t already happened.
You may be able to take an UPFLs before age 55 if you have a protected low pension age or meet the ill-health condition. You can find out more or apply for an UPFLs at Your Retirement Planner
If you've flexibly accessed your benefits, the MPPA is the amount that can be paid in one year to your money purchase arrangements without a tax charge applying. 2015/2016 is a transitional year, please speak to your financial adviser for more information.
For the 2016/2017 tax year, the MPPA will be £10,000. The government is consulting on its proposal to reduce the MPAA from £10,000 to £4,000 with effect from 6 April 2017.