What is an uncrystallised funds pension lump sum (UFPLS)?
An uncrystallised funds pension lump sum (UFPLS) is a way of taking out an ad hoc sum from your SIPP.
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. Find out more about UFPLS.
When you take an UFPLS, 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. For more information, see our taxation of pensions page.
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.
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.