Reduction to money purchase annual allowance (MPAA)

At Spring Budget 2017 the government announced that from 6th April 2017 the money purchase annual allowance (MPAA) will reduce to £4,000. Legislation will be included in Finance Bill 2017.

Anyone who has already triggered the MPAA may wish to consider making maximum use of the current £10,000 MPAA prior to 6th April. Once triggered, it is not possible to use carry forward to increase the MPAA.

As a reminder, we have included a list of the actions that trigger the MPAA and our full guide is available at the link below.

The following will trigger the MPAA (either from a UK registered pension plan or from an overseas scheme that has had UK tax relief)

  • Taking income from a flexi-access drawdown (FAD) plan (includes short term annuity purchase) – only withdrawing tax free cash won’t trigger the MPAA
  • Taking an uncrystallised funds pension lump sum (UFPLS) – if the UFPLS is £10,000 or less, see if it’s possible to take the funds as a ‘small pot’ instead as this won’t trigger the MPAA and isn’t a Benefit Crystallisation Event (BCE).
  • Converting capped drawdown to FAD and then drawing some income
  • Taking more than 150% GAD from a capped drawdown plan
  • Receiving a stand-alone lump sum when entitled to primary protection and Tax Free Cash protection is more than £375,000.
  • Receiving a payment from a flexible lifetime annuity (ie. one where payments can decrease)
  • Receiving a scheme pension from a Defined Contribution (DC) arrangement where it’s being paid directly from those DC funds to less than 11 other members (e.g. a SSAS).
  • In addition, anyone who was in the old ‘flexible drawdown’ before 6th April 2015 is subject to the MPAA from 6th April 2015 (irrespective of whether they have taken an income withdrawal before then)

The above relate to a member and their own funds – these triggers don’t apply where benefits are being paid to a dependant/beneficiary (eg. where a beneficiary receives a FAD income payment from a dependant’s/nominee’s/successor’s FAD arrangement this isn’t a trigger).

No comments yet.

Leave a Reply

Time limit is exhausted. Please reload the CAPTCHA.