What’s a UFPLS and is it the same as a FLUMP?

I’m interested in using one of my smaller pensions to take a few lump sums when I’m in retirement. Should I be looking at income drawdown or would this count as a UFPLS (and is this the same thing as a FLUMP)?

Question asked by Mrs EJ Morgan
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Answered by Tom Conner

One and the same: UFPLS and FLUMPS

In April of 2015, Chancellor George Osborne’s much-trumpeted new pension freedoms came into force. They provided a long overdue revamp to the UK’s lumbering pension regime and in doing so launched two new types of income drawdown.

By adding a raft of new access rights, the new rules replaced ‘flexible’ and ‘capped’ income drawdown with the new ‘flexi-access drawdown’. This confers great flexibility when it comes to taking lump sums.

You can choose to take up to 25% of your chosen pension pot as a tax-free lump sum (or more if you have a protected lump sum), or to take all of your pension pot in cash with the first 25% tax free, and pretty much anything in between, thanks to the flexibility it offers to choose your own level of withdrawals.

The new rules also introduced an alternative form of drawdown which focuses purely on lump sums. Unfortunately, it’s referred to as taking an uncrystallised funds pension lump sum or a UFPLS – which is quite a mouthful! (In this instance, ‘uncrystallised’ pension funds mean those that haven’t already been placed into drawdown.) For ease, numerous senior pension industry figures have now adopted the more user-friendly name of a ‘FLUMP’ (even though it’s not a perfect acronym).

With a FLUMP, each lump sum payment that’s drawn down will be 25% tax free, with the remainder subject to income tax at your marginal rate. So far, FLUMPS have proved to be the most popular option with recent HMRC research illustrating that since the new freedoms came into force, more pension savers have employed this route to access their pension benefits than any other. All this means that ‘FLUMPing’ your pension is no longer something to worry about!

pension lump sums
tax-free lump sums
lump sums and income drawdown
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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