Both flexi-access drawdown (FAD) and uncrystallised funds pension lump sum (UFPLS) are ways of taking your pension pot a bit at a time. The main difference is when you take your tax-free cash.
Taking your tax-free cash up front – flexi-access drawdown
The first way of taking your pension pot a bit at a time is to take 25% tax-free cash at the start and move the remaining 75% into a separate account.
Then, each time you take money out of that account, you’ll pay tax on the full amount of each lump sum. With flexi-access drawdown your money purchase annual allowance (MPAA) isn’t triggered when you take the initial 25% tax-free cash, it’s only triggered once you take your first withdrawal. At any time, you can choose to use any remaining money in your flexi-access drawdown account to buy an annuity, or transfer it to another flexi-access drawdown provider.
Taking your tax-free cash gradually – UFPLS (uncrystallised funds pension lump sum)
The second way to take your pension pot a bit at a time is to take your tax-free cash gradually.
So each time you take money from your pension pot, 25% of it is tax free and you pay tax on the other 75% of each lump sum. If you take your tax-free cash gradually your money purchase annual allowance (MPAA) is triggered by the first lump sum you take. At any time you can choose to take a different retirement option with any remaining money in your pension pot or transfer it to another provider
These options will work differently for different people, depending on a whole range of circumstances and factors. That’s why we always recommend you get guidance and advice as well as doing your own research.