News updates

05 April 2017

Hot topic

Changes to the Money Purchase Annual Allowance

The Money Purchase Annual Allowance has been scheduled to reduce from £10,000 to £4,000 from 6 April 2017, although this is subject to Parliament approval.

The Money Purchase Annual Allowance (MPAA) is the amount you can save each year into a money purchase (or ‘defined contribution’) pension arrangement before being charged tax.
 
However, the MPAA only applies if you’ve already taken some of your pension savings using any of the following options:
 

  • as a full cash payment (unless your pension pot is worth less than £10,000),
  • using drawdown arrangements (i.e. taking a series of cash lump sums), or
  • to buy an annuity where the income can be reduced

 
If you trigger the MPAA, and the proposed reduction goes ahead, you can continue to pay up to £4,000 tax-free into other money purchase pension arrangements (such as Brass, AVC Extra or the IWDC Section) each tax year. However, tax will apply to any contributions over £4,000.
 
If you haven’t taken money from any of your pension arrangements using the options above, the MPAA does not affect you.
 
You can learn more about the MPAA in the ‘Tax limits – Annual Allowance’ guide in the Read as you Need section.
 
Remember: it’s your responsibility to monitor how much Annual Allowance you have used and report it to your pension schemes and to HMRC.



 

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