Two routes, one pension pot
In brief: Flexi-access drawdown (FAD) and UFPLS are the two main ways to take money from a defined contribution pension. Both give you access to tax-free cash and taxable income, but the mechanics are different. This page walks through how each one works, with a concrete example.
FAD requires you to crystallise your pension first — separating 25% as tax-free cash and moving 75% into a drawdown pot. UFPLS skips crystallisation entirely — each withdrawal is a self-contained event with its own 25/75 tax split.
The mechanics differ, and the tax treatment differs depending on how much you take and when.
Worked example: accessing £20,000
Suppose you have a £200,000 DC pension and want to access £20,000 this year. Here is what happens under each route.
Using Flexi-Access Drawdown
To take £20,000 via FAD, you would first crystallise a portion of your pension. For example, crystallise £80,000:
- £20,000 is available as tax-free cash (25% of £80,000)
- £60,000 moves into a drawdown pot (stays invested)
- Taxable income this year: £0 — you took the tax-free cash only, not a drawdown withdrawal
- Remaining uncrystallised: £120,000
Later, when you take income from the drawdown pot, every pound withdrawn is 100% taxable.
Using UFPLS
To take £20,000 via UFPLS, you withdraw £20,000 directly from your uncrystallised pension:
- £5,000 is tax-free (25% of £20,000)
- £15,000 is taxable as income (75% of £20,000)
- Remaining in pension: £180,000 (all still uncrystallised)
The £15,000 taxable portion is added to your other income for the year. If you have other income, this could push you into a higher tax band.
Key difference in this example
With FAD, you separated £20,000 of tax-free cash without creating any taxable income this year. With UFPLS, you received £20,000 but £15,000 of it counts as taxable income immediately.
The FAD route gave you the same amount of cash but with a different tax profile — no taxable income now, but a £60,000 drawdown pot where future withdrawals are fully taxable.
How the two routes compare
| Flexi-Access Drawdown | UFPLS | |
|---|---|---|
| Requires crystallisation | Yes — funds must be designated for drawdown | No — withdrawn directly from uncrystallised pot |
| Tax-free cash | 25% taken upfront at crystallisation (PCLS) | 25% of each individual withdrawal |
| Taxable portion | 100% of every drawdown withdrawal | 75% of each withdrawal |
| Income pattern | Any amount, any time from the drawdown pot | Lump sums only — no regular income facility |
| Remaining funds | Crystallised pot managed separately, stays invested | Stay in existing pension until next withdrawal |
| Triggers MPAA | When you first take taxable income from drawdown | On first UFPLS withdrawal |
| Lump Sum Allowance | Tax-free cash (PCLS) counts against LSA | Tax-free portion (25%) counts against LSA |
| Death benefits | Remaining drawdown pot can be inherited. From April 2027, included in estate for IHT. | Remaining uncrystallised pot can be inherited. From April 2027, included in estate for IHT. |
How each route works in practice
FAD supports withdrawals of any amount at any time from the drawdown pot. It requires an initial crystallisation step, after which your fund sits in a drawdown wrapper.
UFPLS is a lump-sum mechanism — each withdrawal is a self-contained event with no separate drawdown arrangement required. No crystallisation is needed.
Using both together: The same pension can use both routes at different times — for example, crystallising a portion while leaving the remainder uncrystallised for UFPLS withdrawals.
Tax considerations
Both routes create taxable income that is added to your other income for the year. The amount of tax you pay depends on your total income in that tax year.
With UFPLS, 75% of each withdrawal is immediately taxable in the year you take it. A £40,000 UFPLS creates £30,000 of taxable income in a single year — enough to push into the higher rate band if you have other income.
With FAD, the timing of taxable income is determined by when you take drawdown withdrawals, not at the point of crystallisation. You can crystallise and take only the tax-free cash this year, then spread drawdown withdrawals across future years.
The tax outcome depends on the amounts involved, your other income, and the timing of withdrawals.
The Lump Sum Allowance
Both routes use up the Lump Sum Allowance (LSA) on their tax-free portions:
- FAD: Each PCLS payment at crystallisation reduces your remaining LSA
- UFPLS: The 25% tax-free element of each withdrawal reduces your remaining LSA
The LSA is currently £268,275 across your lifetime. Once exhausted, all pension withdrawals become fully taxable — no further tax-free cash is available from either route.
Tracking cumulative LSA usage matters if you use both routes, as both draw from the same allowance.
These projections are for modelling purposes only. They do not constitute financial advice. Tax rules are subject to change. Please consult a qualified financial adviser before making financial decisions.