UFPLS Pension Income Calculator – taking an Income from my Pension
Going down this route is not a trivial matter and the Pension Service strongly advises anyone considering such a route to take regulated advice prior to starting a UFPLS drawdown. Health warning over!
The first of two options for drawing down your pension – in flexible drawdown you typically take 25% of your pension pot upfront as a tax free amount (although you can leave it fully invested) and then drawdown from what’s left in the pot. This drawdown income is all taxable at your marginal rate once you have exceeded your 25% tax free amount. There are a number of very good calculators out there that will show you how long your pension pot will last for any chosen monthly income. The Hargreaves Lansdown Drawdown calculator is a good example and has a chart showing life expectancy against the length of time your pension will last. They also offer a free and much more comprehensive written illustration on the same page.
When using these calculators, always be aware of the assumptions that they make and tailor the results to your particular circumstances. Tax bands, inflation, fees and investment growth are all pertinent factors that some calculators include, others don’t!
Uncrystallised Funds Pension Lump Sum (UFPLS)
The second option for pension drawdown is UFPLS. Every time you access funds from your pension you will be receiving 25% of it tax free and 75% of it will be taxed at your marginal rate. The tax is deducted by your pension provider prior to sending you the monthly payment. UFPLS is a useful option if you don’t need your 25% tax free sum all at once and/or you want to keep as much of your pot invested for as long as possible.
I couldn’t find a suitable UFPLS calculator online for working out UFPLS calculations. so have created the one below. It is designed to show how long your pension pot will last if you take a monthly income from your Pension pot using the UFPLS scheme. The calculator works out the amount of tax you would have to pay to meet your desired target monthly income. Based on your desired income, and taking into account the resulting tax band, the investment growth rate and expected charges you enter, the calculator then works out the age at which your Pension pot will have shrunk to a zero balance.
You can easily alter the parameters in the UFPLS calculator to account for different investment growth rates, tax rates and fees and charges. Please don’t rely on the calculator for detailed retirement planning though – it is intended as an indication only.