What is an Uncrystallised Funds Pension Lump Sum (UFPLS)?

Chris Torney / 24 March 2015

Chris Torney outlines the new rules around withdrawing money from your pension pot and explains the potential pitfalls and tax implications of raiding your pension fund.



On 6 April a host of new rules relating to pensions are being introduced. Essentially, they will mean that people will be under less obligation to use their pensions to buy an annuity than in the past.

It will become easier to leave a pension invested while taking a regular income from it, a process known as drawdown.

Read our guide to pension drawdown.

Taking cash from your pension

It will also be possible to make one-off or regular cash withdrawals from a pension.

These cash withdrawals have the unwieldy official title of “uncrystallised fund pension lump sums” (or UFPLSs for short).

The withdrawals can generally only be made from pension funds which have not been used to buy an annuity or enter into a drawdown scheme (these two processes are described as “crystallising” the pension). The pension holder must be aged 55 or older, or meet the ill-health criteria for accessing their pension early.

Tax on your lump sum

From April 6, whenever you take an UFPLS, 25% of whatever you withdraw will be tax-free, while the remaining 75% will be taxed as income – so the rate you pay on it will be 0%, 20%, 40% or 45% depending on how much you take and what other income you have in the relevant tax year.

Until now, typically only people with smaller pension funds (of up to £30,000) have been able to take their funds as cash in this way.

Read our quick reminder of the pension rule changes.

Will I be able to take advantage of this?

In the press, this withdrawal process has been described as using a pension like a bank account. But not all pension firms are expected to have the systems set up by 6 April to allow customers to make these regular withdrawals.

If you would like to take regular lump sums, check with your pension company whether this will be possible or how soon they will allow this.

You may have to transfer your pension to a rival provider in order to take advantage of UFPLS.

Potential problems

It is likely that some people who withdraw cash from their pensions early in the financial year may be taxed too highly by HM Revenue & Customs.

If you receive income in April, for example, your tax office will treat it as if it expects you to get the same amount every month for the rest of the tax year. If you only plan to make one withdrawal in the year, this could mean you pay too much tax and have to claim it back or wait for it to be automatically repaid.

Confused by pensions? Read our guide to the different types of pension. 

The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.