What is an uncrystallised funds pension lump sum (UFPLS)?
An uncrystallised funds pension lump sum (UFPLS) is a way of taking an ad hoc sum from your SIPP, after age 55 (57 from 2028).
You can take an UFPLS from any part of your SIPP you haven't previously accessed, e.g. via drawdown. 25% of each lump sum is tax-free, and the remaining 75% subject to income tax.
Jo has a SIPP valued at £100,000 which she hasn't yet accessed. She chooses to take an ad hoc UFPLS payment of £10,000 gross. £2,500 of the lump sum is tax-free, while the rest is subject to income tax.
The remaining £90,000 of her SIPP will remain untouched and stay invested in her SIPP.
When you take an UFPLS, your withdrawal will be subject to income tax at your marginal rate. Until we receive a tax code from HMRC, we may need to apply an emergency 'Month 1' tax code – meaning HMRC will assume it's the first in a series of monthly withdrawals. This could mean you’ll pay more tax up front than you were expecting, though HMRC should refund any tax you overpay. we may need to tax it using an emergency code until we receive a tax code from HMRC. This may result in you paying a large amount of tax up front.
Once you take an UFPLS from your SIPP, the amount you can contribute each year to your SIPP (and any other money purchase pensions) will be restricted to £4,000 a year. This is known as the money purchase annual allowance (MPAA). For more information, see our pension contribution rules page.