Flexible Access and Money Purchase Annual Allowance (“MPAA”) Print
A reduced annual allowance of £4,000 applies in respect of money purchase pension contributions, known as the money purchase annual allowance (MPAA), to individuals who have already flexibly accessed their pension benefits. HMRC introduced the MPAA to ensure that there are no potential recycling issues with individuals claiming further tax relief on any new contributions made having taken their pension benefits under the flexibility rules.
It is only when pension benefits have been flexibly accessed that the MPAA of £4,000 applies. This applies in the following circumstances (known as trigger events):
- Taking an uncrystallised funds pension lump sum (UFPLS).
- Taking income above the maximum Government Actuary’s Department limit from an existing capped drawdown arrangement.
- Being in flexible drawdown at any time before 6 April 2015 as a member (not a dependant). [Whether income had been taken, or the flexible drawdown policy still existed at 6 April 2015 is irrelevant].
- Going into flexi-access drawdown from an existing capped drawdown arrangement or with uncrystallised funds and then subsequently taking income.
- Taking a stand-alone lump sum for an individual who has primary protection with associated registered tax-free cash.