Money Purchase Annual Allowance
Important information: Pension and tax rules can change, and any benefits will depend on your circumstances. This information isn’t personal advice. You can usually access money in a pension from age 55 (rising to 57 from 2028). If you’re not sure what’s best for your situation, you should ask for financial advice.
What is the Money Purchase Annual Allowance (MPAA)?
For most people, the total amount they can contribute towards their pensions this tax year is £60,000. But if you trigger the MPAA, this will reduce the amount you can contribute to money purchase plans (e.g. personal pensions), including tax relief and employer contributions to £10,000 a year.
Unlike with the annual allowance, where it may be possible to carry forward unused allowance from previous years, it’s not possible to increase the Money Purchase Annual Allowance.
What triggers the MPAA?
Once you've flexibly accessed your pension, you’ll have trigged the Money Purchase Annual Allowance (MPAA). This means your future contributions into money purchase pension schemes such as the HL Self-Invested Personal Pension, will be restricted to £10,000.
Flexibly accessing a pension includes:
- Having flexible drawdown before 6 April 2015
- Exceeding income limits from drawdown set up before 6 April 2015
- Taking an Uncrystallised Funds Pension Lump Sum (UFPLS) or a standalone lump sum
- Taking an income payment from most drawdown arrangements set up after 5 April 2015
- Taking an income payment from drawdown converted to flexible drawdown after 5 April 2015
- Receiving an income payment from a scheme pension with 12 or fewer members, or from a flexible annuity
What doesn't trigger the MPAA?
Flexibly accessing a pension doesn’t include:
- Taking a pension arrangement as a small lump sum due to it being worth less than £10,000
- Taking income from capped drawdown set up before 6 April 2015 which remains within capped drawdown limits
- Taking tax-free cash and no income
- Taking a pension as an annuity or scheme pension other than as described above
The Money Purchase Annual Allowance doesn’t apply to contributions made before you flexibly access your pensions, even if this is part way through a tax year, nor in a tax year in which you take benefits from a pension while in ‘serious’ or ‘severe’ ill health.
What happens if you exceed the MPAA?
Any pension contributions above the MPAA will trigger a tax charge. This is calculated by adding the amount you have exceeded the MPAA by to your taxable income for that year. This charge should be declared and paid through your income tax self-assessment.
Any excess over the MPAA won't count towards the annual allowance. For example, if you have a defined benefit pension and a personal pension which is subject to the MPAA, and you paid in £20,000 to your personal pension only £10,000 will count towards your annual allowance. This means you can still build up £50,000 in your defined benefits pension without exceeding the £60,000 annual allowance.
Tax rules can change, and benefits depend on your circumstances.
How to add money to your SIPP
The quickest way to add money to your SIPP is with a lump sum online or through the HL app. Please read the Key Features (including contribution checklist) first, then:
account online or through the HL app
2. Select your SIPP account and choose 'Add money'
3. Follow the debit card instructions
Don’t forget our UK-based helpdesk are on hand to answer any questions you might have. And you can view our charges online anytime.
Money in a pension isn’t usually accessible until age 55 (57 from 2028).
Why choose the HL SIPP?
Like other pensions, the HL Self-Invested Personal Pension (SIPP) offers some of the most generous tax perks available, but it’s also award-winning and gives you great investment choice.
We're a FTSE 100 company, trusted by 1.7 million clients and regulated by the Financial Conduct Authority.
Make monthly contributions from £25 or lump sum payments of £100 or more, as and when you choose. Check your pension anytime online or with the HL app.
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Get help from our UK-based helpdesk 6 days a week. They can answer your questions no matter how big or small.
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They're always happy to assist, professional at all times and extremely knowledgeable.
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