If you’re nearing retirement or planning how to access your pension savings, you’ve likely come across the term Uncrystallised Funds Pension Lump Sum (UFPLS).
But what does it really mean, and how does it compare to other pension withdrawal options like drawdown or annuities?
This guide will explain everything you need to know about uncrystallised pension lump sums, from how they work to their tax implications, including a simple real-world example to help you understand exactly what to expect.
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What Is an Uncrystallised Funds Pension Lump Sum (UFPLS)?
An Uncrystallised Funds Pension Lump Sum (UFPLS) is a way of withdrawing cash from your pension pot without needing to buy an annuity or go into drawdown.
“Uncrystallised” means the money in your pension pot hasn’t been accessed or earmarked for income yet.
When you take a UFPLS:
- 25% of the amount is tax-free
- 75% is taxed as income
You can take one lump sum or multiple UFPLS payments over time. This option is available under the UK’s Pension Freedoms legislation introduced in 2015, which gave savers more control over how they access their retirement funds.
🧠 Key difference: In a drawdown, your funds become “crystallised” and go into a separate account for flexible access. With UFPLS, you’re taking money directly from your uncrystallised pension pot.
🔁 Crystallised vs Uncrystallised Pension Funds
Before diving deeper, let’s break down what “crystallised” and “uncrystallised” mean:
| Term | Meaning |
|---|---|
| Uncrystallised Funds | Pension savings that haven’t been accessed yet. |
| Crystallised Funds | Funds that have been used to buy an annuity or moved into a drawdown plan. |
By choosing a UFPLS, you’re accessing part of your pension while leaving the rest uncrystallised and invested.
Pension withdrawal tax calculator UK
UFPLS Pension Lump Sum Calculator
💡 How UFPLS Works – Step by Step
- Check Your Pension Type: UFPLS is only available from defined contribution (DC) pensions — not final salary schemes.
- Eligibility: You must be aged 55 or over (57 from 2028).
- Select an Amount: You decide how much to withdraw. Each UFPLS withdrawal includes 25% tax-free and 75% taxable income.
- Receive Your Payment: HMRC deducts tax automatically via PAYE.
- Repeat If Needed: You can take further UFPLS payments as long as you have uncrystallised funds left.
✅ Tax Treatment:
- 25% tax-free: Paid upfront with no deductions.
- 75% taxed as income: Based on your income tax band for the year.
🔍 Search Intent: “How much of my pension can I take tax-free?”
Answer: 25% of each UFPLS withdrawal is tax-free.
📊 Uncrystallised Funds Pension Lump Sum Example
Let’s look at a simple example that reflects real-life usage of a UFPLS.
🔹 Example:
- Pension Pot: £100,000 (uncrystallised)
- You want to withdraw: £20,000 as a UFPLS
🔸 Breakdown:
- 25% tax-free: £5,000
- 75% taxable: £15,000 (added to your income for the year)
If your total annual income (including the taxable part of the UFPLS) stays within the basic tax band, you’ll pay 20% on the £15,000. That means a tax bill of £3,000, and you receive £17,000 net from the withdrawal.
⚠️ Important: If you withdraw a large amount, it might push you into a higher tax bracket.
🧾 User Intent: “Uncrystallised funds pension lump sum example”
✔️ Answered in clear terms with a realistic scenario.
✅ Pros and Cons of Taking UFPLS
✅ Advantages:
- Simple access: No need to set up a drawdown plan.
- Tax-free cash: You get 25% of each withdrawal tax-free.
- No annuity required: Keep control of your pension pot.
❌ Disadvantages:
- Taxable income: 75% is taxed and may affect benefits.
- Risk of running out of money: No guaranteed income like an annuity.
- Impact on lifetime allowance: If exceeded, there may be extra tax charges.
🔍 Search Terms:
- “Is lump sum pension taxable?”
- “Benefits of taking lump sum from pension”
🧠 When Should You Consider a UFPLS?
UFPLS might be the right choice if:
- You want occasional access to cash rather than regular income.
- You have other sources of income (e.g., part-time work, rental income).
- You’re not ready to crystallise your entire pension pot.
- You want to avoid the complexity of drawdown or annuity products.
🎯 Ideal for those who want flexibility, control, and simplicity.
🔍 Common Query: “Can I take my pension as a lump sum?”
✔️ Yes — UFPLS allows you to take lump sums from your pension without converting the full pot.
💸 Tax Planning Tips for UFPLS Withdrawals
To avoid unexpected tax bills, consider these smart strategies:
1. Withdraw in Smaller Chunks
Taking smaller UFPLS payments across tax years can help keep you in a lower tax bracket.
2. Monitor Your Total Income
Remember, the taxable portion of your UFPLS adds to your total income. This could affect:
- Your tax rate
- Child benefit eligibility
- State benefits
3. Use Personal Allowance (£12,570) Wisely
If you have no other income, you can withdraw up to £16,760 via UFPLS and pay zero tax:
- £12,570 (personal allowance)
- £4,190 (25% tax-free from the £16,760 total)
🔍 Search Intent:
- “How to take pension lump sum tax-free”
- “Tax implications of lump sum”
❓ Frequently Asked Questions (FAQs)
🔹 Can I take multiple UFPLS payments?
Yes. As long as your pension pot has uncrystallised funds, you can make multiple UFPLS withdrawals.
🔹 Do all pension providers offer UFPLS?
Not all do. Check with your provider. Some may require you to move your pension to another scheme.
🔹 How does UFPLS compare with flexi-access drawdown?
- UFPLS: Simple, direct lump sum.
- Drawdown: You crystallise your fund, take tax-free cash, and get flexible income.
- UFPLS is easier, but drawdown offers ongoing income management.
🔹 Is UFPLS available after age 75?
Yes, but different tax rules and limits on the lifetime allowance apply.
✅ Tip: Always consult a financial advisor before making large withdrawals.
🏁 Final Thoughts
The Uncrystallised Funds Pension Lump Sum (UFPLS) option is a flexible, tax-efficient way to access your pension pot without the commitment of an annuity or drawdown product.
It allows you to maintain control over your retirement savings while taking lump sums as and when you need them.
However, like all pension options, it comes with important tax considerations and long-term implications. Always evaluate your income needs, tax position, and investment plans before making a withdrawal.
Want to explore whether UFPLS is right for your retirement plan?
✅ Speak to a regulated financial advisor today or use our UFPLS tax calculator to model your options.