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What is the money purchase annual allowance (MPAA)?

Date: 26 April 2023

3 minute read

The MPAA is a reduced annual allowance for contributions into a money purchase scheme. It is triggered when individuals flexibly access their money purchase pension in certain ways. Once the MPAA is triggered carry forward is no longer available in relation to contributions to money purchase schemes.

The MPAA is currently £10,000 and applies from the moment it is triggered. So, it is possible to pay in more than £10,000 for the tax year in which the MPAA is triggered if the amount paid in afterwards is no more that £10,000 and the total amount before and after the trigger does not exceed the standard annual allowance and carry forward available. Any amount exceeding this will cause an annual allowance charge.

The MPAA does not affect how much can be paid into a defined benefit schemes and there are special rules about what a trigger is for hybrid schemes.

Triggers

  • Taking income from a flexi- access drawdown fund
  • The automatic conversion on 6th April 2015 of a flexible drawdown (available prior to 6th April 2015) to flexi-access drawdown – this is regardless of whether any income is being taken
  • Taking income from capped drawdown that is higher than the capped limit and causing a conversion to flexi-access drawdown
  • Choosing to convert from capped drawdown to flexi-access drawdown then taking income
  • Taking an uncrystallised funds pension lump sum (UFPLS)
  • Taking a stand alone lump sum from a money purchase scheme, when the individual has primary protection with a protected tax-free lump sum greater than £375,000
  • Purchasing an annuity where the contract allows decreases on the annuity income paid
  • Receiving a scheme pension from a money purchase scheme that is not a collective money purchase scheme where:
    • the entitlement occurs on or after 6 April 2015,
    • at the time of that entitlement, fewer than 11 other individuals were entitled to the present payment of a scheme pension, or dependants’ scheme pension, under the same pension scheme, and
    • the scheme pension is not payable under an annuity contract which was treated as having become a registered pension scheme
  • Any of the above that happens in an overseas pension scheme that has benefitted from tax relief.

Payments that are not triggers

  • Tax-free cash (pension commencement lump sum)
  • Trivial commutation lump sum
  • Small pots
  • Taking income from capped drawdown within the capped limit
  • Taking income from beneficiary’s flexi-access drawdown
  • Receiving a scheme pension under a money purchase arrangement where at least 11 other individuals are receiving a scheme pension or dependants’ scheme pension
  • Purchasing an annuity that cannot decrease in amount except in prescribed circumstances (see PTM062400).

Information requirements

When a member takes the first action that triggers the MPAA, the scheme administrator where the trigger happened must notify the member within 31 days. If a member has triggered the MPAA and then transfers to a new scheme the scheme administrator has 31 days to pass this information to the new receiving scheme.

A member who has triggered the MPAA has 91 days to tell any other pension scheme where contributions are still actively being paid, that they are now subject to the MPAA.

Previous MPAA limits

2017/18 - 2022/23 - £4,000

2016/17 - £10,000


Updated April 2023

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The information provided in this article is not intended to offer advice.

It is based on Quilter's interpretation of the relevant law and is correct at the date shown. While we believe this interpretation to be correct, we cannot guarantee it. Quilter cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained in this article.

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