Effect of reducing money purchase annual allowance

The government is consulting on reducing the money purchase annual allowance (MPAA) from £10 000 to £4 000. The change is planned to take effect from April 2017.

The aim is to limit the extent to which pension savings can be recycled to take advantage of tax relief. The document is seeking views on whether this level of MPAA would have an impact on auto-enrolment or disproportionately affect particular groups.

The allowance applies to individuals who have flexibly accessed their pension benefits. The limit of £10 000 was introduced in April 2015 to stop people claiming further tax relief on any new contributions.

Responses to the consultation should be emailed here by 15 February 2017.

The government’s analysis shows that only 3% of over-55s pay more than £4 000 to a pension so the number of people who have accessed the pension freedoms and currently pay in more than £4...