Uncrystallised funds pension lump sums (UFPLS)

An uncrystallised funds pension lump sum (UFPLS) is a cash payment taken straight from money purchase pension savings that have not yet been used to provide any benefit. Each payment is split 25% tax free and 75% taxable as pension income at your marginal rate, with the tax free part capped by your remaining lump sum allowances. Taking the first UFPLS also triggers the money purchase annual allowance, which limits future tax relieved money purchase saving to £10,000 a year.

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What exactly is an UFPLS?

An UFPLS is an authorised member payment under section 166(1) and paragraph 4A of Schedule 29 to the Finance Act 2004. It has been available since 6 April 2015 and can only be paid from uncrystallised funds held in a money purchase arrangement that is not a collective money purchase arrangement. “Uncrystallised” means funds that have not yet been used to provide you with any benefit under the scheme, so money already in drawdown or used to buy an annuity cannot be taken this way.

HMRC’s Pensions Tax Manual at PTM063300 confirms that the tax rules place no limit on the number of UFPLS payments you can take. Subject to the scheme’s rules, you can take the whole pot as one lump sum, take a series of lump sums over several years, or take some UFPLS payments and use the rest of the fund for something else, such as an annuity. Many schemes do not offer UFPLS at all, or only allow a full withdrawal, so the scheme rules are the first thing to check.

Who can take one, and when is it not available?

You must have reached normal minimum pension age, which is 55 now and rises to 57 from 6 April 2028, unless you meet the ill health condition or have a protected pension age. The payment cannot be a pension commencement lump sum or a lump sum treated as a trivial commutation lump sum, and the money used to pay it must represent uncrystallised rights immediately before you become entitled to it.

PTM063300 lists cases where an UFPLS cannot be paid at all:

where the funds represent, to any extent, a disqualifying pension credit, meaning a pension sharing credit from an ex spouse or former civil partner whose pension was already in payment when it was shared;
where you hold enhanced protection, or primary protection, together with protection for lump sum rights that exceeded £375,000 on 5 April 2006.

Because an UFPLS must come from a money purchase arrangement, a defined benefit (final salary) pension cannot pay one.

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How is each payment split between tax free and taxable?

Under sections 579A and 637D of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), 25% of each UFPLS is tax free and 75% is taxed as pension income in the same way as a pension. The split applies to each payment separately, so if you take £8,000 now and £8,000 next year, each payment is £2,000 tax free and £6,000 taxable. This is different from drawdown, where the tax free cash is taken once when funds are designated; see flexi access drawdown.

The tax free 25% is limited to a “permitted maximum”, which is the lower of your available lump sum allowance and your available lump sum and death benefit allowance. HMRC guidance says the lump sum allowance is usually £268,275 and the lump sum and death benefit allowance is usually £1,073,100, unless you hold a protected allowance. Anything in the first 25% that exceeds the permitted maximum is taxed at your marginal rate. The UFPLS is a relevant benefit crystallisation event, so its tax free part uses up both allowances.

If you took pension benefits before 6 April 2024, your available allowances are usually reduced by 25% of the lifetime allowance you used. HMRC’s guidance explains that you can apply for a transitional tax free amount certificate if that standard calculation overstates what you actually took tax free, but you must apply before your first relevant benefit crystallisation event.

How is the tax collected, and why is too much often deducted?

The scheme must operate PAYE on the taxable 75%. HMRC’s PAYE Manual at PAYE94055 explains that unless you hand over a P45 dated in the current tax year, the scheme uses the emergency tax code on a month 1 basis for the first payment, and HMRC then issues a proper code for later payments. A month 1 code gives you only one twelfth of the personal allowance and rate bands, so a large single UFPLS is often heavily over taxed. Our guide to PAYE tax codes explains how codes work.

You do not have to wait until the end of the tax year to get overpaid tax back. GOV.UK lists the claim forms:

P55 if you have not emptied the pot and are not taking regular payments;
P53Z if you have emptied the pot and have other income, such as a job or another pension;
P50Z if you have emptied the pot and have no other income apart from the State Pension.

If you do not claim, PAYE94055 says HMRC will review the position automatically after the tax year ends. If you file Self Assessment, the UFPLS goes on your return and any overpayment comes back through the return.

What does an UFPLS do to future pension saving?

Under section 227G of the Finance Act 2004, the first UFPLS is a trigger event for the money purchase annual allowance (MPAA). PTM056510 confirms that from 2023 to 2024 onwards the MPAA is £10,000. From then on, if your money purchase contributions (yours plus your employer’s, including tax relief) exceed £10,000 in a tax year, the excess is charged, and the rest of your saving is tested against an alternative annual allowance of £50,000. Unused MPAA cannot be carried forward.

Your scheme must send you a flexible access statement within 31 days of the first flexible access. Under regulation 14ZB of the Registered Pension Schemes (Provision of Information) Regulations 2006, PTM166400 says you must pass that information to any other scheme in which you are building up benefits within the relevant 13 week period. Business owners funding pensions through their company should read our guide to pension contributions for business owners before taking an UFPLS.

A worked example

Illustration only. Sam, 60, lives in England and has a private pension of £15,000 a year. Sam has an uncrystallised pot of £80,000 and is no longer contributing. The 2026 to 2027 bands are a £12,570 personal allowance, basic rate on taxable income up to £50,270 and higher rate above that.

	Whole pot in one year	£40,000 in each of two years
Tax free part of each UFPLS	£20,000	£10,000 each year
Taxable part of each UFPLS	£60,000	£30,000 each year
Total income for the year including pension	£75,000	£45,000 each year
Income above the higher rate threshold	£24,730	None

Taking the pot in one year pushes £24,730 into the 40% band. Splitting it across two tax years keeps everything in the basic rate band, saving roughly £4,946 (20% of £24,730). Both routes trigger the MPAA, which does not trouble Sam because Sam has stopped contributing. Someone in Scotland would need to use the Scottish rates and bands instead.

When is an UFPLS a sensible choice?

An UFPLS tends to suit people who:

want occasional cash and are happy for a quarter of each withdrawal to be tax free rather than taking all the tax free cash up front;
can time withdrawals to use up their personal allowance or basic rate band each year;
have stopped, or will soon stop, making money purchase contributions, so the MPAA has little effect;
are in a scheme that does not offer drawdown but does allow UFPLS.

It is less suitable for people still receiving large employer contributions, because the MPAA could create an annual allowance charge. It is also a poor fit where the aim is to take tax free cash while leaving the rest invested untouched, because drawdown allows that without triggering the MPAA until income is drawn. If the pot is £10,000 or less, a small pot lump sum gives the same 25% tax free treatment without triggering the MPAA.

What mistakes do people make?

Taking the whole pot in one tax year when spreading it over two or more years would have kept the taxable part in the basic rate band.
Forgetting that the State Pension uses most of the personal allowance, so more of each UFPLS is taxed than expected. See how the State Pension is taxed.
Assuming emergency tax is final and not claiming the refund on the right form.
Taking a small test withdrawal as an UFPLS while still employed with generous contributions, and triggering the MPAA for good.
Pushing adjusted net income over £100,000 with a single withdrawal, which starts tapering the personal allowance.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.