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Digital Focus Online

Government goes ahead with the reduction to the MPAA

The Government has now confirmed it will retrospectively implement with effect from April 2017 the reduction to the Money Purchase Annual Allowance (MPAA), which it had subsequently delayed due to the snap general election.

As Chancellor, Philip Hammond’s intention behind reducing the MPAA from £10,000 to £4,000 a year is to prevent individuals from "recycling" their pensions by withdrawing cash from their pension pots and then claiming tax relief on new pension contributions.

The reduction to the MPAA will only apply to those who have already taken advantage of the new flexibilities introduced by the pension freedoms in April 2015. Those people who have not used the freedoms or are under 55, will continue to be able to receive tax relief on contributions they make as long as they do not exceed the current annual allowance of £40,000 a year.