Have you triggered the Money Purchase Annual Allowance?
Following the introduction to the Money Purchase Annual Allowance (MPAA) on 6th April 2015, people can be easily caught out on the events which trigger it. Many people don't know what they are, so we have listed them below:
- Take income from a flexi-access drawdown (FAD) plan (including a short term annuity)
- Take an uncrystallised funds pension lump sum (UFPLS)
- Convert a capped drawdown to FAD and subsequently draw an income
- Take more than 150% Government Actuarial Department (GAD) income limit from a capped drawdown plan
- Receive a stand-alone lump sum when entitled to primary protection and tax free cash is protected in excess of £375k
- Receive a payment from a flexible lifetime annuity (ie. one where payments can decrease)
- Receive a scheme pension from a money purchase arrangement where it’s being paid directly to less than 11 other members
- Anyone who had a flexible drawdown arrangement in place prior to 6th April 2015
Should a person be affected by any of the above events and wish to continue to save into a money purchase pension arrangement, they will be restricted in the amount by the MPAA. The allowance itself is just £4,000.
The following do not trigger the MPAA:
- Taking only the tax free cash and placing the balance in FAD (until such time as any income is withdrawn)
- Taking a trivial commutation or small pots lump sum
- Receiving a scheme pension from a DB scheme (eg. pensions from final salary schemes)
- Receiving payments from a conventional lifetime annuity (that can't decrease other than in permitted circumstances)
- Taking no more than 150% GAD from a capped drawdown plan
- Receiving a scheme pension paid directly from the funds of a money purchase pension where at least 11 other members are in receipt of a scheme pension
- Receiving a scheme pension secured by way of an annuity (regardless of number of other members in receipt)
Should any of the above be an area of concern, please seek financial advice.
Our Financial Planning Consultants are available at our office locations across Cumbria, Northumberland, Yorkshire and Scotland. Contact them on 0808 144 5575 or visit https://www.armstrongwatsonfp.co.uk/team.