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Treasury Clarifies MPAA Limits

In our May 2017 article “As you were for the MPAA” we commented on the fact that the proposal to reduce the Money Purchase Annual Allowance (MPAA) to £4,000 had been cut from pre-election legislation, leaving the market unclear as to the way forward. Now an HM Treasury statement has confirmed that all measures cut from the Finance Bill in order to clear the way for the election are to be included in a new Finance Bill which will be presented to Parliament after the summer recess. The statement goes on to say that:

“Where policies have been announced as applying from the start of the 2017-18 tax year or other point before the introduction of the forthcoming Finance Bill, there is no change of policy and these dates of application will be retained.”

What that effectively means (provided the new Finance Bill is passed in Parliament) is that the reduction in MPAA allowance to £4,000 will be retrospectively applied for the 2017/18 tax year.

Research from Retirement Advantage reported on the Moneywise website has shown that of those who have already accessed a proportion of their pensions under the Pension Freedom legislation 37% are still making contributions to a pension plan whilst employers are making contributions on behalf of 19%. Of these, 67% were not aware of the MPAA restriction, nor that breaching that limit could lead to a tax liability.

If you’re looking for pensions or investment advice, or if your situation has changed and you may therefore need to review your existing investments, contact Beckworth by using one of the links on our website.