When taking your pension savings in this way your money purchase annual allowance (MPAA) is triggered the first time you make a withdrawal. So each time you take money from your pension pot, 25% of it is tax-free and you may pay tax on the other 75% of each lump sum. The second way to take your pension pot a bit at a time is to spread your tax-free cash across all withdrawals. Spreading your tax-free cash across all withdrawals – UFPLS (uncrystallised funds pension lump sum) At any time, you can choose to use any remaining money in your flexi-access drawdown account to buy an annuity, or transfer it to another flexi-access drawdown provider. Once you start taking money from your flexi-access drawdown account your money purchase annual allowance (MPAA) is triggered.
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Then, each time you take money out of your flexi-access drawdown account, you may pay tax on the full amount of each lump sum. Under HMRC rules, for every £1 you take as tax-free cash, £3 moves to a flexi-access drawdown account. Using flexi-access drawdown you take 25% tax-free cash up front either a bit at a time or in one go. Taking your tax-free cash up front – flexi-access drawdown The main difference is when you take your tax-free cash. Both flexi-access drawdown (FAD) and uncrystallised funds pension lump sum (UFPLS) are ways of taking your pension pot a bit at a time.
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