Drawdown, UFPLS or Annuity? Since the pension freedoms of 2015, taking money out of a pension has been more flexible than ever. But having more options can lead to confusion and then inertia – we’re unable to make a decision because we don’t understand all the options. So let me help you out…
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Chapters:
00:00 Your options
00:33 Introduction
01:29 Confrontation of Problem
01:43 The Options Explained
06:53 When you would use an annuity
08:02 When you would use Flexi-Access Drawdown
09:18 When you would use UFPLS
09:59 Conclusion
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Great video Pete. I've been a keen follower of your content for a few years now (mainly podcasts) and I really appreciate the down-to-earth approach, breaking down potentially complex subjects into easy-to-understand bite-size chunks. It's my understanding that there's a further potential benefit to the UFPLS option with respect to limiting exposure to pension recycling, particularly for non-taxpayers. For example, someone who has built up a pension lump sum (i.e. in a SIPP) over a number of years can continue to contribute to the SIPP whilst at the same time drawing money from it. This is only permitted if the money taken out is as an UFPLS and is less than £7,500pa. This means it's possible to get tax relief on the contributions without triggering the criteria for pension recycling. This is not available (as I understand it) if the drawdown option is chosen. For non-taxpayers who have been saving up to £3,600pa into a SIPP over a number of years, this could be a helpful way to have a net increase in income, whilst maintaining the ability to continue saving into a pension fund with associated tax relief benefits. That's my understanding, but please correct me if I'm wrong as I'd hate to mislead anyone! Thank you for all you do and keep up the good work!
The main messages I get is, make sure you have a pension to start with, don’t rely on just the state pension
Great video thanks, how easy would it be to take a regular ufplus say quarterly, leaving the remainder uncrystallised pension to continue to grow? Is this a common feature offered.
Cheers Pete. How does it work if you have a decent amount of money in stocks and shares ISAs invested in a split of shares and bonds? How does drawdown work there?
I am surprised at how many financial advisors have no clue what UFPLS is
If you take an annuity, is it indexed on something like inflation to make sure you don’t get impacted by a change in the cost of living?
For the annuity, you get an income for life. Does it mean that when you die, nothing will go to your children or spouse?
Can you move from annuity to drawdown or vice versa? Or, once you’ve initially opted for one option, you’re then stuck with it?
Am I missing something about UFPLS ? Why would I not just treat that as a drawdown and get lump sums as and when or even say monthly akin to I imagine how people would treat drawdown. Limits / costs / ???
(Also, great channel.. much appreciated !!)
Very helpful Pete and explained in simple terms. Would like to understand a bit more about the pros and cons of drawdown v. UFPLS as I cant see any advantage to going into drawdown?
whats the advantage of leaving your money uncrystallized? / how does the money grow when in drawdown?
Great Video. Please do a part two video!! Interestingly a few of your viewers have been saying what I was thinking do you still have to pay tax on drawdown that is less than or exactly the years personal tax allowance I assume not but not sure? Also generally speaking should a flexible drawdown plan grow similarly to the funds in the original pension scheme?
Great video Pete. UFPLS was new to me but a bit confused. From your examples wouldn't flexible drawdown be more tax efficient.
Excellent video. I’ve been withdrawing using UFPLS for about 4 years. (Different amounts each year to maximise my free-tax). Now I’m fully retired and, through your video, understand the balance of my pension fund is ‘non-crystallised’. Does this mean, though I’ve taken some UFPLS’s I still have the option of the ‘FAD’, & withdrawing up to 25% of the remaining fund tax free? Thank you.
UFPLS is new to me although completely logical. Also, I’d not realised the drawdown is managed, and presumably charged, as a separate account. As always VERY helpful. Thank you Pete for such excellent advice all the time
what is the growth difference (percentage rate) between Pre-retirement and drawdown?
I found the way UFPLS is administered can vary from provider. One of mine allows me to apply for an UFPLS which recurs every month automatically just like receiving salary. The actual amount can be varied just by sending an email. A second provider insists on a new application for each UFPLS withdrawal. So for a monthly income you need to fill in pages and pages of forms every month with questions about financial advice etc. etc. Some providers don't allow UFPLS at all. I have been using monthly UFPLS for 5 years.
Hi, just wanted to thank you for this video. I'm currently sitting my R0 Exams to become a qualified Financial Advisor and it has really helped me out !
Excellent explanation of the different options. Question relating to UFPLS…. can i do it myself or again does it have to be done via a financial advisor.?
Very clear explanation, thank you.
Hi, If I buy an Annuity from savings not from pension. Is that going to trigger MPAA?
In 2 years
Wife age 69 lost £ 10.000 in avia acount
Consise and to the point, really well presented. Thanks
Great video. Many thanks
One thing is for certain, the Stock market is going to crash within the next few months or less so get your Pension Fund out of the Stock market, Drawdown does not do this so your Funds are at a huge risk
Any chance of advice on a small pension pot of £60k, at age of 61, instead of larger pension pots all the time.thank you
Very good explanation, although from some comments many do not quite grasp the benefits of UFPLS.. 11 years ago when I was coming up to 65. I asked my SIPP provider if I could just take the income from my pension and get the 25% deduction and pay tax on the 75%. They said no. I then had a long battle with the Pension Office. They could provide no good reason why this should not be possible so UFLPS came about. How big a part I played in this who knows.. As you explained just taking the income each year means the fund could run for ever and you always have funds for an emergencyif required. The ironic thing is that 11 years on I have not taken a penny from my SIPP and never will. Due to covid it saved me from LTA tax due to the market dropping.
A suggestion how about the retirement ISA instead of a pension as a better option if you are never going to be a big pension contributor or a 40% tax payer. The 25% tax free sum is a con and you end up paying tax on your own money. Paying the 25% to the government and getting the income for the rest of your life tax free may be the better option.. This is what you get with apension ISA except HMRC make a contributioin that is not refundable if you let it run.