To understand the Money Purchase … 4. All rights reserved. If you exceeded the MPAA but not the annual allowance, you will pay an annual allowance charge on the amount by which your money purchase contributions exceeded the MPAA. Therefore the maximum total contribution he can make in 2020/21 without suffering an annual allowance charge Money Purchase … Any contributions to money purchase schemes made during the tax year but before your trigger event will just be tested against the annual allowance as normal. This year, you contributed £11,000 to your SIPP (a money purchase pension) and had £32,000 worth of savings to other types of pension. The MPAA was introduced at the same time as the ‘pension freedoms’ rules, which gave people more flexible options for accessing their pensions. Money purchase restrictions only apply to contributions you make to a defined contribution pension and do not affect defined … DB accrual) that exceed the available Alternative AA, taking into … If the MPAA has been exceeded, then the amount over the £4,000 MPAA is added to any other pension input amounts for the The Government saw a risk of people avoiding income tax (and potentially National Insurance Contributions) by diverting their salaries into money purchase pensions, benefiting from tax relief and then immediately withdrawing the funds. The MPAA only applies to contributions to defined contribution pensions and not defined benefit pension schemes. While your annual allowance may vary from year to year (for example, if you use carry forward or are subject to the tapered annual allowance), the MPAA is always fixed. It limits the value of your pension contributions that can be paid into your pension tax efficiently and applies to money put in by you, your employer or anybody else. The Money Purchase Annual Allowance MPAA is a limit on the amount you can pay into your pension and still receive tax relief. The charge is calculated in the same way as any other annual allowance charge.If you exceeded both, you’ll need to work out two figures: You’ll pay an annual allowance charge on the larger of the two amounts. This website is intended for financial advisers only and shouldn't be relied upon by any other person. If an individual’s Threshold Income does not exceed £200,000, they remain subject to the standard AA (£40,000 2020/21 tax year). You exceeded the MPAA but didn’t exceed the annual allowance. In 2020/21 the money purchase annual allowance is set at £4,000. Your other pension savings have not exceeded the alternative annual allowance of £36,000 (£40,000 annual allowance – £4,000 MPAA). What is the MPAA? People affected by the MPAA still have to test all of their pension savings for the year against their annual allowance as normal. For the 2020/21 tax year, an individual with an adjusted income of £300,000 will exceed the adjusted income limit by £60,000. There are ways of accessing pension benefits which don’t trigger the MPAA. Remember that the MPAA is an allowance within an allowance: if you had an annual allowance of £40,000, you could incur an annual allowance charge if your total pension savings exceeded £40,000 or if your money purchase contributions exceeded £4,000. You exceeded both the MPAA and the annual allowance. If you want to learn more about the annual allowance rules, please read our Annual Allowance fact sheet. The MPAA was a way of limiting the scope for this to happen. The money purchase annual allowance was cut in the 2017-18 tax year, down from £10,000 from the previous year. The MPAA was introduced as part of the Pension Freedoms in 2015. What is the MPAA? If it does, then if the Adjusted Income exceeds £240,000, the AA is reduced by £1 for every £2 of income above £240,000. The Money Purchase Annual Allowance (MPAA) In the tax year 2020-21, if you start to take money from your defined contribution pension, this can trigger a lower annual allowance known as the Money Purchase Annual Allowance or MPAA. For tax year 2020/21 onwards, if contributions were to continue at £1,000 per month, the full annual contribution total of £12,000 would be tested against the MPAA. If you are not an adviser please visit royallondon.com.. This will confirm the date on which you triggered the MPAA. It limits how much tax relief you can receive on any contributions you make after you’ve started flexibly drawing your pension. If the MPAA has been exceeded, then the amount over the £4,000 MPAA is added to any other pension input amounts for the year (i.e. If you join a new scheme, you will need to notify them too. The money purchase annual allowance was cut in the 2017-18 tax year, down from £10,000 from the previous year. In 2020/21 the money purchase annual allowance is set at £4,000. As the TAA can only be reduced to £4,000, this applies for individuals with an adjusted income of £312,000 or more. Whether the MPAA applies depends on how you access your pension pot and there are some complicated rules around … The amount by which your total savings exceeded the annual allowance. From the 2020/21 tax year the £150,000 limit is being raised to £240,000, and Annual Allowance is reduced to £4,000 when your income is £312,000 or more. What is the money purchase annual allowance (MPAA)? Please click ‘download’ at the bottom of the page to view the full fact sheet complete with diagrams. For any questions regarding Curtis Banks portal access please click. The Money Purchase Annual Allowance (MPAA) The Money Purchase Annual Allowance was introduced on 6th April 2015 and was set at £10,000 gross p.a. In 2020-21, this is £4,000. Clients with no portal access please contact SIPP Support via phone 01473 296 969 or email sippsupportteam@suffolklife.co.uk to request an account. £240,000 for tax years from 2020/21; For tax years 2016/17 to 2019/20, if adjusted income was £210,000 or greater, the annual allowance is £10,000 - tapering doesn’t go any further. Curtis Banks users who have Curtis Banks SIPP or SSAS should continue to log in via the Curtis Banks portal. © 2019 Curtis Banks Group. The MPAA is £4,000 for the 2020/21 tax year. Who is likely to be affected. The MPAA will apply from the day after your trigger event. Remember that the MPAA is an allowance within an allowance: if you had an annual allowance of £40,000, you could incur an annual allowance charge if your total pension savings exceeded £40,000 or if your money purchase contributions exceeded £4,000. The MPAA is £4,000 for the 2020/21 tax year. The government has now reduced the MPAA to £4,000 gross p.a. He can also carry forward his unused allowance of £10,000 from 2019/20 for defined benefit accrual. The MPAA is £4,000 for the 2020/21 tax year. Can I take pension benefits without triggering the MPAA? Did you find this guide helpful? it will be lower (TAA less £4,000 MPAA) and, from 2020/21 onwards, could be zero for the very highest earners (those with an adjusted income of above £310,000 whose TAA is at the minimum of £4,000). Yes No. Your total pension savings of £43,000 exceed the annual allowance by £3,000. However, they also have to test the value of their money purchase contributions against the MPAA. From tax year 2020/21, tapering continues until the annual allowance is reduced to £4,000. The Money Purchase Annual Allowance (MPAA) ... From the 2020/21 tax year the £110,000 limit is being raised to £200,000. The MPAA was introduced as part of the Pension Freedoms in 2015. The MPAA is a variation of the annual allowance rules which was introduced in April 2015. For the tax year 2020-21 the MPAA is £4,000.