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, which will remain invested for you.
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.
Making a decision
These options will work differently for different people, depending on a whole range of circumstances and factors. We can’t tell you which option is best for you. That’s why we always recommend you get guidance and advice as well as doing your own research.
To find out more about each of these options, take a look at our webpage about taking your pension savings a bit at a time.
When you’ve decided and you’re ready, find out how to take your pension money.