News Detail

17 January 2018

Money Purchase Annual Allowance reduction

The reduction to the Money Purchase Annual Allowance (announced in the Spring Budget) has recently been brought into law.   
As a result, the Money Purchase Annual Allowance is now £4,000, effective from 6 April 2017. 

What is the MPAA?

The MPAA is the amount you can save each year before tax into a money purchase (or 'defined contribution') pension arrangement, such as Additional Voluntary Contribution arrangements.
However, the MPAA will only apply to you if you’ve already taken some of your pension savings using one of the following options:

  • a full cash payment of more than £10,000,
  • a drawdown arrangement (i.e. taking a series of cash lump sums), or
  • an annuity where the income can be reduced

If any of these types of payment have triggered the MPAA, the scheme in which this was done should have written to you to tell you about this.

If you trigger the MPAA, you can continue to pay up to £4,000 tax-free into other money purchase pension arrangements each tax year. Tax will apply to any contributions over £4,000.