Posted on 05/06/2018 by Stephen McPhillips
A number of factors, including the Annual Allowance (AA), govern the amount of contributions to an individual’s pension schemes in any tax year that could be eligible for tax relief, and individuals should seek advice before contributions are paid.
However, there are a number of events that will trigger a reduction in an individual’s Annual Allowance in each tax year to £4,000 for contributions to money purchase pension schemes (e.g. SIPPs and SSASs), known as the money purchase annual allowance (MPAA). One such event is the first drawing of flexi-access income.
The triggering of the money purchase annual allowance also removes the ability to carry forward any unused contribution allowances from previous years.
The trigger events are:
There are instances where the money purchase annual allowance will already apply where:
It is important to remember that the money purchase annual allowance will only apply from the date of the first trigger event, which means that any contributions paid in the same tax year before the trigger event occurred are not affected.
If you would like to find out more about this topic please contact your Financial Adviser or alternatively your Pension Consultant.