Pension Drawdown

Pension Drawdown vs UFPLS: Understanding Your Options

Compare flexi-access drawdown and UFPLS (Uncrystallised Funds Pension Lump Sum) - two flexible ways to access your pension with different tax treatments and features.

By Compare Drawdown Team — Chartered Financial Adviser 6 min read

When accessing your pension, two common methods are flexi-access drawdown and Uncrystallised Funds Pension Lump Sum (UFPLS). While both allow flexible access to your pension pot, they work differently and have distinct implications.

This guide explains how each option works, their key differences, and what many people consider when choosing between them.

What Is Flexi-Access Drawdown?

Flexi-access drawdown allows you to move your pension into a drawdown arrangement where you can take income flexibly while keeping the remainder invested.

How Drawdown Works

  1. You "crystallise" your pension by designating funds for drawdown
  2. You can take 25% of the crystallised amount as tax-free cash
  3. The remaining 75% stays invested in your drawdown pot
  4. You take taxable income from the pot as needed
  5. Your investments can continue to grow (or fall) in value

Key Features of Drawdown

  • Tax-free cash: 25% available upfront or in stages
  • Flexibility: Take income when you need it
  • Investment choice: Select how your funds are invested
  • No income limits: Withdraw as much or as little as you like
  • Death benefits: Remaining funds can pass to beneficiaries

What Is UFPLS?

UFPLS stands for Uncrystallised Funds Pension Lump Sum. It allows you to take lump sums directly from your uncrystallised (untouched) pension without first setting up drawdown.

How UFPLS Works

  1. You request a lump sum from your pension provider
  2. 25% of each lump sum is paid tax-free
  3. 75% of each lump sum is taxed as income
  4. The rest of your pension remains uncrystallised
  5. You can take further UFPLS withdrawals as needed

Key Features of UFPLS

  • Simple process: No need to set up drawdown first
  • Tax-free element: 25% of each withdrawal is tax-free
  • No ongoing management: Your pension stays with your existing provider
  • Flexibility: Take withdrawals when needed
  • Remaining funds: Untouched money stays invested in your pension

Key Differences at a Glance

Tax-Free Cash Treatment

Drawdown: You can take 25% of your pot (or the portion you crystallise) as tax-free cash, either all at once or in stages. Once in drawdown, all further withdrawals from that pot are fully taxable.

UFPLS: Each withdrawal has 25% tax-free and 75% taxable. You cannot take your tax-free cash as a separate lump sum.

Example with £100,000 Pension

Drawdown approach:

  • Take £25,000 tax-free cash upfront
  • £75,000 goes into drawdown
  • All future withdrawals from drawdown are taxable

UFPLS approach:

  • Take £20,000 UFPLS withdrawal
  • £5,000 is tax-free, £15,000 is taxable
  • £80,000 remains uncrystallised
  • Future withdrawals continue with 25/75 split

Provider and Investment Choice

Drawdown: Often involves transferring to a SIPP or drawdown-specific product. Wide investment choice typically available. You choose a provider based on fees, investments, and features.

UFPLS: Usually taken from your existing pension without transferring. Investment choice depends on what your current provider offers. May be more limited than dedicated drawdown platforms.

Complexity

Drawdown: Requires setting up a drawdown arrangement, choosing investments, and ongoing management of your pot.

UFPLS: Simpler administratively - just request a withdrawal when needed. No separate arrangement required.

Tax Implications Compared

Both options provide access to 25% tax-free cash overall, but the timing and structure differs:

Drawdown Tax Scenario

If you want £10,000 income from drawdown (after taking tax-free cash):

  • All £10,000 is taxable income
  • Tax depends on your total income for the year
  • Basic rate taxpayers: £2,000 tax (20%)
  • Higher rate taxpayers: £4,000 tax (40%)

UFPLS Tax Scenario

If you want £10,000 net through UFPLS:

  • You might withdraw approximately £12,500
  • £3,125 would be tax-free (25%)
  • £9,375 would be taxable (75%)
  • Tax payable depends on your income level

The effective tax rate can differ between the two approaches depending on your circumstances and how much tax-free cash you have already taken.

Emergency Tax Considerations

Both drawdown and UFPLS withdrawals may initially be subject to emergency tax if your provider does not have your correct tax code. This can result in overpayment of tax, which HMRC typically refunds.

Money Purchase Annual Allowance

An important consideration is the Money Purchase Annual Allowance (MPAA). This reduces how much you can contribute to pensions from £60,000 to £10,000 per year.

The MPAA is triggered when you:

  • Take taxable income from drawdown (not just tax-free cash)
  • Take a UFPLS payment

If you are still working and making pension contributions, triggering the MPAA may be a significant consideration.

Death Benefits

Both options allow remaining funds to pass to beneficiaries, but with some differences:

Drawdown Death Benefits

  • Nominated beneficiaries can inherit the drawdown pot
  • If you die before 75: beneficiaries receive funds tax-free
  • If you die after 75: beneficiaries pay income tax on withdrawals
  • Funds have been "crystallised" for inheritance purposes

UFPLS Death Benefits

  • Uncrystallised funds can pass to beneficiaries
  • Same age 75 tax rules apply
  • Beneficiaries typically have flexibility in how they access inherited funds

The death benefit treatment is similar, though the crystallised vs uncrystallised status may have administrative implications.

When People Often Consider Drawdown

Drawdown may be worth considering when:

  • You want to take all tax-free cash upfront: If you have a specific use for a lump sum
  • You want extensive investment choice: Dedicated drawdown platforms often offer wider options
  • You plan to actively manage investments: Drawdown is designed for ongoing investment management
  • You want to consolidate pensions: Transferring to a drawdown SIPP can simplify multiple pensions
  • Lower platform fees matter: Some drawdown providers offer competitive pricing for larger pots

When People Often Consider UFPLS

UFPLS may be worth considering when:

  • You want simplicity: No need to transfer or set up new arrangements
  • You are happy with your current provider: Stay with your existing pension scheme
  • You only need occasional withdrawals: Take money when needed without ongoing management
  • You want to preserve tax-free cash: Each withdrawal maintains the 25% tax-free element
  • You have multiple smaller pensions: UFPLS can be simpler than consolidating everything first

Combining Both Approaches

It is possible to use both methods:

  • Move some funds into drawdown for regular income
  • Keep other pension pots uncrystallised for occasional UFPLS withdrawals
  • Use different approaches for different pensions based on their features

This flexibility allows tailoring the approach to individual circumstances.

Provider Availability

Not all pension providers offer both options:

  • Most workplace pensions now offer UFPLS
  • Drawdown may require transferring to a SIPP or specific product
  • Some older pension schemes may have restrictions
  • Check with your provider what options are available

Costs to Consider

Drawdown Costs

  • Platform fees (annual percentage or flat fee)
  • Fund charges (ongoing charges figure)
  • Dealing fees for buying/selling investments
  • Possible transfer costs from existing pension

UFPLS Costs

  • Some providers charge per withdrawal
  • Others offer free UFPLS withdrawals
  • Ongoing pension charges continue on remaining funds
  • Generally lower administrative costs than drawdown

Making the Comparison

Questions that may help when comparing these options:

  • Do you want tax-free cash as a lump sum or spread across withdrawals?
  • How important is investment choice to you?
  • Will you be making regular withdrawals or occasional lump sums?
  • Are you still contributing to pensions (MPAA consideration)?
  • How much do you value simplicity vs control?
  • What are the fees for each option with your provider?

> New to drawdown? Start with our guide on How Pension Drawdown Works to understand the basics before making any decisions.

Summary

Both flexi-access drawdown and UFPLS provide flexible ways to access pension savings. Drawdown offers more control and investment choice but requires more setup and management. UFPLS is simpler but means tax-free cash is spread across withdrawals rather than available upfront.

The right choice depends on individual circumstances, including income needs, attitude to investment management, existing pension arrangements, and whether pension contributions are continuing. For help planning how much to withdraw, see our guide on safe withdrawal rates.

Speak to a qualified financial adviser for personal guidance on whether drawdown, UFPLS, or a combination might be suitable for your situation.

Related Articles