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19 September 2017
How are lump sums from pension funds taxed after April 2015?
I am hoping someone can provide me with a beginner’s guide to the taxation of lump sums from pension funds since April 2015.
My understanding is that we now have two ways of obtaining a lump sum from a pension fund as follows:
- put the fund into (flexi-access) drawdown; or
- take an uncrystallised funds pension lump sum (UFPLS).
With drawdown my understanding is that up to a quarter of the value of the fund can be taken tax-free. Therefore it is not necessary to start drawing the pension just because it is in drawdown because the undrawn fund can remain invested and growing. However I believe that with UFPLS it is 25% of what is taken out that is tax-free.
With this in mind drawdown appears to offer the potential for a higher amount to be taken...
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