Thanks everyone for the replies so far, very helpful

Taking points made in turn ......

Evies Dad - yes take your point about the lumpy tax deduction on the £12,570 so I might well go down the road of monthly UFPLS as others seem to be doing. Also note your point about transferring personal allowances, thank you. We both take advantage of the £2,880 annual SIPP contribution already but thank you for mentioning.

Dan L - you say that both UFPLS and an equivalent FAD could be used to achieve the outcome I want and I don't disagree. Thank you.

Andrew Foster - thanks for the warning, noted.

Busy doing nothing Thanks for the well made point which is probably a big one. My leaning is to take the tax free element in small monthly UFPLS rather than a large amount up front using FAD. I think this for now because:

(a) we don't need the cash and I don't want to trigger a tax liability on income earned in Mrs Trout's name. We fund annual ISAs from our GIAs and so a large tax free lump sum TFLS would become unwrapped and income thereon potentially taxable

(b) it feels easier to make a smaller decision if I'm honest; and

(c) given SIPP's attractive inheritance tax properties it feels psychologically better to keep the SIPP larger for longer.

Thrugelmir Thank you for the fulsome reply. I guess my objective is not to squander easy to understand tax breaks that you lose once you get into the next tax year. I agree that in the end there really are only two certainties in life - death and taxes - I am hopeful of delaying both !!!

So it would appear that there are no major real red flags thus far. It's interesting because if you google "UFPLS v Drawdown" most advisors seem pretty negative about UFPLS. Anyone any ideas why?

I will continue to research but please if anyone else has anything to add, I would be most grateful as ever.

Harry

One factor might be linked to the adviser’s role in planning for their client’s possible future needs and identifying risks etc. Advisers may believe the FAD route offers more flexibility and fewer restrictions.

I’m no expert, but if I’ve understood correctly, a potential disadvantage of the UFPLS route is that is triggers the Money Purchase Annual Allowance straight away. With the FAD route a client could access their 25% lump sum and the MPAA restriction would be delayed until the rest of their pension is eventually accessed, i.e., when they drawdown some of the remaining 75%

So, say a client retires 10 years early, is recommended the UFPLS route and then over the following months disaster strikes (obviously!) and the stock market drops 50%. The client might choose to return to work and may want to pay a lot of their earnings into their pension to replace their losses and buy whilst cheap etc, but would find the MPAA restricts them. Then a UFPLS client may feel they’d been badly advised, especially if they find themselves working alongside a FAD colleague, who can pay in unrestricted amounts.

I think it’s different for DIY-ers, we’re making the decision ourselves and won’t be looking for anyone else to blame!

The MPAA has been increased from £4k to £10k this year, so maybe less of a concern now anyway?

If the floor underneath the equity markets is taken away. For many of those in DC pension schemes may not be an immediate issue anyway. Markets generally appear to have taken the interest rate rises in their stride.

I would be going for option A in the current climate, or in any bear market. During a more normal cycle, i would probably drawdown on cash and all stocks using drawdown to keep my desired asset allocation.
I believe if you take , a very small withdrawal from your SIPP in month one, this will trigger your tax code for your platform , which should avoid a large tax bill that you need to reclaim .

Thank you to everyone who has chipped in with help on this thread

Having now spoken to Hargreaves Lansdown, it appears they don't have an easy mechanism for doing monthly UFPLS so I think to get me started I'm just going to partially drawdown £20,000.

I will then set up a direct debit to send me £12,570 / 12 = £1,047.50 per month to use up the annual allowance. This will gradually erode the £15,000 remaining after the £5,000 tax free cash.

The £5,000 tax free cash will just be plonked in Active Savings over 5 years at around 5% currently. The balance remaining in drawdown earns the following interest at the moment if I just want to keep it really simple



I'm not bothered about the lost months of this tax year, I'm just looking to get started and will review again in a year or so as I grow into it all of this and get some experience.

Really, in summary, I'm doing this to syphon off the natural yield in my SIPP each year to use up my annual allowance in to me a simple and easy to understand way (hopefully!)

Appreciate many of you will already be doing this and that it probably seems like child's play but I haven't found it easy to decide what to . Mainly because it's that feeling of "I don't know what I don't know" !!!

Across 2 phone calls, HL have been very helpful and professional I must say

Thanks again all