Retirement Planning: Provide a long-term income - combination of taxable and tax-free cash (UFPLS)

One of the changes brought in on 6 April 2015 was the introduction of a new authorised payment called an 'un-crystallised funds pension lump sum' (UFPLS). An UFPLS withdrawal can be paid direct from a Money Purchase arrangement as a 'lump sum' – the lump sum comprises the 25% tax-free element, with the remaining 75% being taxable at the member’s marginal rate of tax, as appropriate.

Where the scheme allows, individuals can take their entire money purchase pot as an UFPLS in one go, or take a series of smaller UFPLS withdrawals, each of which will have a 25% tax-free element.

This guide is intended specifically for modelling a regular series of smaller UFPLS withdrawals, as follows:

Setting-up a regular UFPLS withdrawal

When scheduling a regular (UFPLS) 'income' from an as-yet untouched money purchase account, select Withdrawals & Annuity > Crystallisation of Money Purchase. When the dialogue box appears, as illustrated below, the first thing is to choose the event at which the first UFPLS withdrawal is to occur:

Lump Sum:

NB: Regardless of the level of income desired, or chosen, the key to setting-up UFPLS withdrawals is to set the Lump Sum option to '100%'. This ensures that 100% of the crystallised amount (which will be a combination of tax-free cash and taxable income) will be received immediately by the individual.

Crystallised Amount:

 1. To receive a pre-ordained level of income, one should enter the desired monetary amount (by choosing either the 'Fixed with Inflation' or the 'Fixed without Inflation' option). Frequency will be set to 'Recurring'.

2. To receive a finite monetary amount (of tax-free cash), by 'phasing' the crystallisation of benefits over a pre-ordained timeframe, one would set the Crystallised Amount to '100%'. Frequency will be set to 'Phase Over x Years', with the choice of an appropriate time period.

3. To receive a varying amount (of tax-free cash), from one year to the next, dependent upon the individual's particular needs, one will need to enter a series of discrete crystallisation instructions, using a series of 'events' added to the Timeline, in advance. Having added an appropriate series of events, one can use the Add Crystallisation button to enter a series of 'One Time' crystallisation events.

To return to 'Retirement Planning Options - Default Settings' click here <<<


Last updated 05 October 2015, Release 4.0.22



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