As there are six different ways to draw tax free cash and taxable income from your pension fund, whether you're working or retired, it'll pay you to check them out now
Get To Grips With Annuities, Flexi-Access Drawdown And UFPLS (Whatever That Is!)
Six Ways To Take Benefits From Your Pension Fund 1.
Leave Your Whole Pension Fund Untouched
You don’t have to start taking money from your fund when you reach your ‘selected retirement age’. You can access it from age 55. Or you can leave your money invested until you need it.
Get A Guaranteed Income
You use your fund to buy an Annuity. It’s an insurance policy that guarantees you an income for the rest of your life, no matter how long you live.
Get An Adjustable Income
Known as Flexi-Access Drawdown, your fund is invested to give you a regular income. You decide how much to take out and when, and how long you want it to last.
Take Cash In Chunks
You can take sums of money from your fund until it runs out. Known as Uncrystallised Funds Pension Lump Sum (UFPLS), your 25 per cent tax free amount isn’t paid in one lump sum. Instead, you receive it over time.
Take Your Whole Fund In One Go
It’s effectively the same as option 4 above, except you take your entire fund in one go. 25 per cent is tax free, and the rest is taxable.
Mix Your Pension Options
You can mix different options above to meet your needs.
There’s more detail on all of these options on Pensionwise.
What The Experts Think About Drawdown And UFPLS
With Annuity rates so low, the majority of people select Flexi-Access Drawdown and UFPLS. So here’s three interesting takes on which one might work best for you.
SIPP and SSAS Charges Can Affect Your Decision
Many SIPP and SSAS providers charge each time you take one-off payments from your pension. Typically, it can cost between £100 and £250 per event. If you’re taking UFPLS, it could add up to a lot of fees.
One of the cheapest SIPP providers is AJ Bell. If you’re sticking to stockmarket assets in your SIPP, you’ll pay just £100 per year no matter how many withdrawals you make (at February 2018, plus VAT).
Comparing Annuity, Drawdown And UFPLS
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AJ Bell Is Often The Best Value SIPP For Stockmarket Assets
Over time, charges can wipe out a huge part of your fund. We like AJ Bell because there are no set-up costs. If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund. And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment). However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.
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As SIPPclub neither advises on, nor arranges, nor recommends specific investments or strategies, we're unable to say whether a SIPP or SSAS or any investment within it is right for you. Ultimately, it’s your money and your decision, and you should only proceed once you're satisfied you've undertaken sufficient due diligence. If you need advice, you should speak to your trusted adviser, or you could find a local adviser from Unbiased.co.uk. Alternatively, we'd be pleased to introduce to a suitably qualified independent financial adviser.
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