Following the Autumn Statement 2016, HMRC have opened a consultation ‘Reducing the money purchase annual allowance’.

  • Since April 2015 individuals aged over 55 have been able to flexibly access their pension benefits whilst continuing to save into a pension.  
  • If they wish to make any further contributions to a defined contribution pension, tax-relieved contributions are restricted to a special money purchase annual allowance (MPAA) of £10,000.

HMRC are concerned that the MPAA effectively enables individuals to double up on their pension tax relief by recycling their pension savings. They propose to reduce the MPAA from £10,000 to £4,000 with effect from April 2017.

Consultation questions

Question 1: Do you agree that a £4,000 MPAA would minimise re-cycling pension savings and that, coupled with ongoing monitoring, the new MPAA will allow the continued successful rollout of automatic enrolment?

Question 2: Is there any evidence that setting the MPAA at £4,000 would impact disproportionately on particular groups?

The consultation will close on 15 February 2017.

Consultation document: Reducing the money purchase annual allowance

Links to our guides

Pensions: tax planning guides (index to freeview and subscriber guides)

For further developments see our Tax update and rolling planner