UFPLS, drawdown, scheme specific TFC and the strange case of the permissive statutory override - case study

Jim and Andy were co-owners of a company which they have just sold at the very end of the tax year. They have a fully insured small-self administered scheme (SSAS). Jim is 65 years old and has a £1,200,000 fund with a scheme specific tax-free cash (TFC) entitlement of £660,000. Andy is 55 years old and has a fund of £120,000 and is entitled to 25% TFC. Jim is intending on retiring. Andy is looking to start a new business; he has a significant amount of money from the sale of the business but needs some funds to support himself whilst his new company starts. Neither of them has any lifetime allowance protection.

What are the options?

Jim’s protected TFC entitlement is £660,000 and he wants to keep this. He could take his benefits from the SSAS but it doesn’t offer drawdown. He doesn’t want to buy an annuity as he wants to pass on any unused pension to his children.

One option would be to block transfer from the SSAS with Andy to a personal pension that allows drawdown. This would protect the scheme specific TFC and give him the option to leave his remaining benefits invested within a pension wrapper. He would have to take the full amount of scheme specific TFC at the same time. If he phased benefits he would revert to a maximum 25% TFC.

Andy needs his cash quite urgently and doesn’t really want to go through and pay for the advice process to transfer to a new arrangement only to take the whole fund as an UFPLS. He’s not concerned that the money purchase annual allowance will apply to him as he intends on using the sale of his new business to fund his retirement. Nor does he have scheme specific TFC which would be lost if he takes his benefits as an UFPLS.

As they are the only members and the trustees of the SSAS they can decide to make use of the Permissive Statutory Override that was brought in from April 2015. This allows the trustees to offer pension flexibility without updating the scheme rules.

Taking the benefits


As the SSAS can now offer flexible benefits Andy can be paid an UFPLS immediately. He will get £30,000 TFC and the remaining £90,000 will be taxed at emergency rate. He’s got no other income in this tax year. Emergency rate tax is applied irrespective of where you live in the UK.

Under the emergency tax code the amount being withdrawn is treated as if it will continue to be paid each month. Although in many cases it will actually be a one-off payment – known as the 'Month 1' basis.

The provider will therefore apply 1/12th of the personal allowance to the payment, and will assess the remaining payment against 1/12th of each of the income tax bands currently in force.

  Annual tax bandMonth 1Tax rateTax due
Personal allowance £12,570.00 £1,047.50 0% £0.00
Basic rate band £37,700.00 £3,141.67 20% £628.33
Higher rate band  £37,700-£150,000  £9,358.33 40%  £3,743.33
Additional rate band  Over £150,000  £76,452.50 45%  £34,403.63
     (£90,000.00) Total tax due £38,775.29
      TFC £30,000.00
      Net received  £81,224.71

Assuming he has no other earnings in the tax year the actual tax due would be as follows (the figures assume Andy is not a Scottish rate taxpayer). 

  Annual tax bandAmount in bandTax rateTax due
Personal allowance £12,570.00 £12,570.00 0% £0.00
Basic rate band £37,700.00 £37,700.00 20% £7,540.00
Higher rate band  £37,700-£77,430 £39,730.00 40%  £15,892.00
    (£90,000.00) Total tax due £23,432.00
      TFC £30,000.00
      Net received £96,568.00

The amount of overpaid tax is £15,343.29

He will be able to claim back the overpaid tax from HMRC. You can find out how to do this in our emergency rate tax article


Jim needs to take his full scheme specific TFC in one go otherwise the TFC will reduce to 25%. Using the Permissive Statutory Override he could then transfer his remaining funds to a drawdown provider as a transfer in drawdown.

However, as his fund is over the current lifetime allowance of £1,073,100. His adviser has checked to see whether he can apply for either fixed or individual protection 2016.

  • Jim’s fund value on 5 April 2016 was £1,128,000.
  • No further contributions have been paid to the plan since 5 April 2016.
  • He has no other pension savings/accrual.

This means he can apply for fixed protection 2016, which will give him a personal lifetime allowance of £1.25 million. He will get the full TFC entitlement of £660,000 and not be liable for a lifetime allowance charge.

Even if he had made a pension contribution after 5 April 2016 he could have applied for individual protection, which would have given him a personal lifetime allowance of £1,128,000. He would still be entitled to £660,000 TFC but there would be a lifetime allowance charge on £72,000.

Relevant links

Emergency tax and lump sum withdrawals

HMRC Pensions Tax Manual - PTM063300: Member benefits: lump sums: uncrystallised funds pension lump sum (UFPLS)

Fixed protection

HMRC Pensions Tax Manual - TM093210: Protection from the lifetime allowance charge: fixed protection, fixed protection 2014 and fixed protection 2016: applying for fixed protection 2016 (FP 2016)

Individual protection

HMRC Pensions Tax Manual - PTM094210: Protection from the lifetime allowance charge: individual protections 2014 and 2016: applying for individual protection 2016 (IP 2016)

Protection of scheme specific tax-free lump sum

HMRC Pensions Tax Manual - PTM063130: Member benefits: lump sums: protection of pre-6 April 2006 lump sum rights: scheme-specific lump sum protection - overview

Lifetime allowance charge

Pensions Tax Manual - PTM080000: The lifetime allowance and the lifetime allowance charge: contents


The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.

All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

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