What is the money purchase annual allowance
Updated 14 December 2016
If you’ve flexibly accessed your benefits, the Money Purchase Annual Allowance (MPAA) is the amount that can be paid in one year to your money purchase arrangements without a tax charge applying. 2015/2016 is a transitional year, please speak to your financial adviser for more information. For the 2016/2017 tax year the MPAA will be £10,000. The government is consulting on its proposal to reduce the MPAA from £10,000 to £4,000 with effect from 6 April 2017.
If the MPAA provisions apply to you, and during the year more that £10,000 has been paid to your money purchase arrangements under all of your registered pension schemes, a tax charge:
- will apply on the money purchase contributions above £10,000, and
- may apply on the value of any savings made to defined benefit arrangements that are higher than £30,000 plus any carry forward you have available.
Special rules apply in the year that the reduced MPAA rules first apply to you. In that year, any money purchase contributions paid before the date the rules apply are treated as if they had been made to a defined benefit arrangement, and tested against the £30,000 plus carry forward limit. Please speak to a financial adviser for more information.