Money Purchase Annual Allowance to remain at £10k

05 May 2017

One of the measures that was removed from the finance bill before it became an act of law is the reduction of the MPAA to £4,000.

The Money Purchase Annual Allowance (MPAA) is the reduced amount of annual allowance of tax-free pensions savings that an individual is permitted if a defined contribution pension fund has been flexibly accessed under the pension flexibility reforms. (The standard annual allowance is £40,000.) The MPAA is designed to limit the extent to which individuals could recycle funds and gain double tax relief and unused amounts cannot be carried forward to later years.

The measure was originally announced at Autumn Statement 2016 and documents published alongside budget 2017 confirmed that the MPAA would be reduced from £10,000 to £4,000 with effect from 6 April 2017.

However, one of the measures that the shortened ‘rushed through’ finance act 2017 dropped from the Bill was the reduction of the MPAA.

We shall have to wait until after the general election to find out if this measure will be resumed.