Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to Anonymous,longview,nimnarb,sg31,Rhyd6, for Donating to support the site

UFPLS vs Drawdown

titanium22
Posts: 1
Joined: November 24th, 2021, 6:38 pm
Has thanked: 1 time

UFPLS vs Drawdown

#460660

Postby titanium22 » November 24th, 2021, 7:00 pm

Hello fellow fools and thanks for the very useful information on here :)

My wife and I are planning to retire early shortly, so am doing some forecasting of income, tax, expenses etc. along with research on options. We both have some DC pensions we plan to take to see us through to state pension / DB pensions.

UFPLS seemed most appropriate for our circumstances as we have no requirement to draw anything other than our annual income needs each year (ie no mortgage or credit cards to pay off). No LTA issues and no plans to continue working. We are happy to manage our investments (ie do not feel the need for a financial advisor to manage on an ongoing basis) plus manage the initial tax issues with HMRC around any withdrawals. We have been managing our current pension investments and once not tied to where our employers pay our DC pensions, would probably look to move them to a SIPP to reduce costs (especially with regard to withdrawal costs).

From reading these boards and various other resources such as youtube etc. the impression is given that far more people are using drawdown than UFPLS. Which leads me to wonder if there is something else I am missing?

The cynic in me suspects that there is a louder voice for drawdown owing to the financial services industry (ie financial advisors).

If you have no large lump sum needs and are happy to manage your own SIPP - what are the drawbacks of UFPLS? pun intended :)

Is it accurate to say more people use drawdown than UFPLS as is the impression given?

Thanks

swill453
Lemon Half
Posts: 5933
Joined: November 4th, 2016, 6:11 pm
Has thanked: 638 times
Been thanked: 2247 times

Re: UFPLS vs Drawdown

#460670

Postby swill453 » November 24th, 2021, 7:29 pm

I'm not sure I recognise the distinction in your subject line. UFPLS is drawdown, just a special type that gets you a proportion of your tax free cash along with it.

I used UFPLS for a few years without a problem. However this year I decided to crystallise my SIPP and take all the 25% tax free money out of it. So ongoing I will be taking standard drawdown every year.

I manage all my investments myself, ensuring that I have cash available in the account when I want to draw it out.

Scott.

genou
Lemon Slice
Posts: 709
Joined: November 4th, 2016, 1:12 pm
Has thanked: 102 times
Been thanked: 234 times

Re: UFPLS vs Drawdown

#460675

Postby genou » November 24th, 2021, 7:47 pm

UFPLS is a disaster zone if you have LTA issues. As you say you don't have any of those, it is perfectly fine to use.

xxd09
2 Lemon pips
Posts: 247
Joined: November 19th, 2016, 2:44 pm
Been thanked: 157 times

Re: UFPLS vs Drawdown

#460777

Postby xxd09 » November 25th, 2021, 10:20 am

Long retired-but was in you position at retirement
Initially took the tax free lump sum in its entirety from my SIPP
Because….it was simple,gave me a warm feeling in first few years of retirement that my income would be OK
Lived on these monies for some years and let my SIPP and ISA (wife’s also)grow undisturbed
Allowed the transition from working to retirement to pass reasonably painlessly
A believer of keeping it simple and not trading
By the time I came to drawdown from SIPPs and ISAs I had a better handle on our retirement expenses
Eventually took my wife’s tax free lump sum too further down the road
Seemed to work for me
xxd09

DiviLuvva
Posts: 41
Joined: April 3rd, 2018, 6:31 pm
Has thanked: 1 time
Been thanked: 7 times

Re: UFPLS vs Drawdown

#460922

Postby DiviLuvva » November 25th, 2021, 5:55 pm

This isn't relevant to the OP, but I've always remained in capped drawdown since taking the first 25% PCLS in 2010, which has allowed me to avoid triggering the MPAA and so continue adding more to my SIPP when I have relevant earnings, which are "lumpy".

(Considering IHT issues, I recently decided it was better to spend most or all of the annual income from my ISA, and occasionally a bit of its capital, and instead boost my SIPP. It's presently at 50% of LTA. I'll reach age 66 in March 2022)

taken2often
Lemon Slice
Posts: 253
Joined: November 9th, 2016, 12:10 pm
Has thanked: 3 times
Been thanked: 37 times

Re: UFPLS vs Drawdown

#461486

Postby taken2often » November 27th, 2021, 10:32 pm

I spent years fighting the Pensions Office to get UFPLS. Sippdeal in the day told me in 2010 that I could not draw my pension in this manner. At the time I had a SIPP annual income that would not only cover my needs but increase my fund just like an index. What is not realised is with UFPLS you get more 25%. Example fund of 100k = 25k ten years on say 150k = 37.5k

As it turns out I did not take any of my SIPP and never will. In theory many people could share this fund and pass it on as long as they only used the income. If I did draw it I would use 80% of the income and invest the other 20% as an index to give me an inreased income the next year, and so on

I had to push H_L quite a bit to highlight UFPLS and they are still reluctant to include it as a form of Drawdown. So many do not know that it exists.

It may be that it is of more interest to those who invest for income and never sell stock for income. Which is what the industry likes best

Bob

ursaminortaur
Lemon Half
Posts: 6357
Joined: November 4th, 2016, 3:26 pm
Has thanked: 104 times
Been thanked: 463 times

Re: UFPLS vs Drawdown

#461498

Postby ursaminortaur » November 27th, 2021, 11:21 pm

taken2often wrote:I spent years fighting the Pensions Office to get UFPLS. Sippdeal in the day told me in 2010 that I could not draw my pension in this manner. At the time I had a SIPP annual income that would not only cover my needs but increase my fund just like an index. What is not realised is with UFPLS you get more 25%. Example fund of 100k = 25k ten years on say 150k = 37.5k

As it turns out I did not take any of my SIPP and never will. In theory many people could share this fund and pass it on as long as they only used the income. If I did draw it I would use 80% of the income and invest the other 20% as an index to give me an inreased income the next year, and so on

I had to push H_L quite a bit to highlight UFPLS and they are still reluctant to include it as a form of Drawdown. So many do not know that it exists.

It may be that it is of more interest to those who invest for income and never sell stock for income. Which is what the industry likes best

Bob


UFPLS is just a simplified less flexible version of phased income drawdown (aka partial drawdown) which was already available before the advent of UFPLS from some providers.

https://www.onlinemoneyadvisor.co.uk/pensions/pension-drawdown/phased-income-drawdown/

Whenever you take out a segment from your fund as part of a phased income drawdown, you can first take part of that portions tax-free element (25% of that segment).

By converting segments of your pension fund on a regular basis, rather than all at once, you are able to stagger the tax-free cash element you receive. The obvious drawback to this is the amount of tax-free cash you can take when you convert the entire fund upon full retirement will not be as high.

Phased income drawdown is a very tax-efficient way of allowing you to retire gradually by reducing your working hours and using your pension fund to top up your income until you decide to retire completely.


Phased income drawdown is more flexible than UFPLS since you can use it to just periodically take the 25% tax free cash from the portions you crystallise whilst leaving the rest of the crystallised part of the pot untouched and thereby avoiding triggering the MPAA unlike with UFPLS which will always trigger the MPAA. Hence phased income drawdown is better if you are still working part time and want to continue contributing to your pension without being limited by the £4000 MPAA limit.

taken2often
Lemon Slice
Posts: 253
Joined: November 9th, 2016, 12:10 pm
Has thanked: 3 times
Been thanked: 37 times

Re: UFPLS vs Drawdown

#461636

Postby taken2often » November 28th, 2021, 4:19 pm

I may be wrong but Phased Drawdown ment a package of small policies and no doubt charges for each policy. UFPLS is a much more simple method of doing the same thing, plus you keep the evergrowing fund. It is no doubt best for those with other incomes or pensions, or still working, as we know nothing is perfect.

Very interesting article in the Sunday Times Money section. about the difference between Government Pensions and the rest of us. Around 73 years of contributions. This article should be another nail in the coffin regarding LTA.

Bob

ursaminortaur
Lemon Half
Posts: 6357
Joined: November 4th, 2016, 3:26 pm
Has thanked: 104 times
Been thanked: 463 times

Re: UFPLS vs Drawdown

#461656

Postby ursaminortaur » November 28th, 2021, 5:48 pm

taken2often wrote:I may be wrong but Phased Drawdown ment a package of small policies and no doubt charges for each policy. UFPLS is a much more simple method of doing the same thing, plus you keep the evergrowing fund. It is no doubt best for those with other incomes or pensions, or still working, as we know nothing is perfect.

Very interesting article in the Sunday Times Money section. about the difference between Government Pensions and the rest of us. Around 73 years of contributions. This article should be another nail in the coffin regarding LTA.

Bob


No phased drawdown meant crystallising portions of the pot at different times. The only problem was that not all providers offered it.



I can't access the full article in the Times but from the comments it would appear that what they are portraying as an average pension for a manager is far far too high.

https://www.thetimes.co.uk/article/how-to-match-a-civil-service-pension-clue-it-may-take-you-73-years-lwrfqmqrc

Alexjames
16 hours ago
..a ‘civil service manager on average pay would get a pension of £47,215 a year in retirement’. It would be interesting to know how that figure was arrived at. What salary are you basing that figure on?. I am a lawyer who works for the government and my pension will be nowhere near that; to be more accurate around half of that. I am a grade 7, which is similar to many managers so these figures make no sense. Maybe if you are referring to senior civil servants; no way is the ‘average’ manager going to get a pension like this. Seems this article is more about pitting people against each other than being accurate.
.
.
.
K Pearson
11 hours ago
Grade 7s and above make up less than 5% of the civil service. More than 70% of civil servants are clerical and junior officers, earning up to 25k a year and expecting a pension (maximum) of 12.5k - most less than 10k.
.
.
.
SB
17 hours ago
So a civil service manager on average pay would get a pension of £47,215 a year in retirement.

^^Something has gone seriously awry here. I work in the Civil Service and I don't know anyone who is due to receive a pension at this level - let alone a more 'manager'. I'm a senior manager and my pension forecast is for less than half of this amount.

Annemaie Seager
14 hours ago
Me too - as the maximum is roughly 40% of salary that equates to a salary of over £100k - hardly an average salary. Were talking very, very senior civil servants here, not a senior manager.

taken2often
Lemon Slice
Posts: 253
Joined: November 9th, 2016, 12:10 pm
Has thanked: 3 times
Been thanked: 37 times

Re: UFPLS vs Drawdown

#461719

Postby taken2often » November 28th, 2021, 10:54 pm

The article used the following Doctor,Nurse Judge Head Teacher Civil Servant Manager and a MP. All had different pay scales. The point being made was how their pensions related to non government employees on similar salaries in a DC pension. They said it may take you 73 years to acheive the same pension.This appeared to be caused by how much the Public Sector employers contributed.

The private sector is subject to market swings and limits on contributions by employers etc.

Bob

airbus330
Lemon Slice
Posts: 327
Joined: December 1st, 2018, 3:55 pm
Has thanked: 152 times
Been thanked: 158 times

Re: UFPLS vs Drawdown

#462404

Postby airbus330 » December 1st, 2021, 6:14 pm

I'm currently using UFPLS from my DC pension. Using these and available cash to stay under the income tax threshold for a few years before the state pension kicks in, after which I'll use up a smaller pension first then if still living the larger one. I like the IHT advantage, which as I understand it, may enable me to pass the pot down outside of my estate. Also the marginal increase in tax free portion if the pot grows.
My only grumble is the time that Aviva take to process and pay the UFPLS, on complaint earlier this year they paid some compensation of inconvenience caused. HMRC seem to take about 6 weeks to refund my tax.

xxd09
2 Lemon pips
Posts: 247
Joined: November 19th, 2016, 2:44 pm
Been thanked: 157 times

Re: UFPLS vs Drawdown

#462471

Postby xxd09 » December 1st, 2021, 11:49 pm

One of the reasons I opted for 25% Tax free sum plus then Drawdown as required was that it was simple and cheap and easy to manage
I don’t pretend to be any sort of financial expert so had to keep things simple for my own benefit
The platforms involved no doubt feel the same way
Complexity is the enemy of a good plan including retirement plans
xxd09
PS no doubt as we age as we will -simplicity will assume increasing importance!

airbus330
Lemon Slice
Posts: 327
Joined: December 1st, 2018, 3:55 pm
Has thanked: 152 times
Been thanked: 158 times

Re: UFPLS vs Drawdown

#462518

Postby airbus330 » December 2nd, 2021, 8:54 am

xxd09 wrote:One of the reasons I opted for 25% Tax free sum plus then Drawdown as required was that it was simple and cheap and easy to manage
I don’t pretend to be any sort of financial expert so had to keep things simple for my own benefit
The platforms involved no doubt feel the same way
Complexity is the enemy of a good plan including retirement plans
xxd09
PS no doubt as we age as we will -simplicity will assume increasing importance!


Lot of truth in that, particularly the PS. It does worry me that if I had a sudden demise, my wife would struggle to sort my finances and manage them. I have started to address this with some simplification and a written blog of what I'm doing and why.

xxd09
2 Lemon pips
Posts: 247
Joined: November 19th, 2016, 2:44 pm
Been thanked: 157 times

Re: UFPLS vs Drawdown

#462524

Postby xxd09 » December 2nd, 2021, 9:14 am

I have done our finances for years-our personal division of labour
There is no way one can pass over the gained knowledge of years to a spouse in any sort of satisfactory manner
I keep my kids (executors) fully apprised of our finances-one of my sons in law is a banker thank goodness
I know that if I go first or go gaga she will rely on them to step up
Planned accordingly
xxd09


Return to “Pensions - Practical Problems”

Who is online

Users browsing this forum: No registered users and 3 guests