What is an Uncrystallised Funds Pension Lump Sum?
Updated 26 April 2018
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 UPFLs will result in the money purchase annual allowance (MPAA) applying to you, if this hasn't happened already. Special rules apply in the first year that the MPAA provisions first apply to you.
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 MPAA is the amount that can be paid by or for you in one year to your money purchase arrangements without a tax charge applying.
For the 2017/2018 tax year, the MPAA will be £4,000. Please speak to a financial adviser for more information on the MPAA.