If it feels like a game of guess the allowance for the Money Purchase Annual Allowance (MPAA) there is good reason:
- On 5 April 2017 the MPAA was £10,000.
- On 6 April the MPAA was reduced to £4,000.
- On 25 April, parliament expected to debate an amendment to the Finance Bill to remove the clause that would reduce the MPAA.
- Up to 3 May - the time period in which the Finance Bill must be passed ahead of the dissolution of Parliament in preparation for the general election.
- After 8 June 2017, assuming the Conservatives are re-elected the financial secretary to the Treasury has confirmed that the government would like to reintroduce all dropped clauses (including the one reducing the MPAA) at the earliest opportunity in the next Parliament.
This is all well and good but what is very unclear is the MPAA allowance limit and the effective date from which it should apply.
The MPAA is the amount of pension contributions an individual can make and receive tax relief on, if they have already accessed another pension.
This may apply only to a small number of people but those affected now have a conundrum, as do their advisers, and this potentially includes all of those who have been in this situation since 6 April 2017.
For anyone in this situation it will be prudent to seek advice in order to avoid running up a potential tax bill.
For organisations who know they have staff who are in pension drawdown but who also have on going contributions to pension benefits it is vital that they are educated on this hokey-cokey of an allowance.
Snap election pressure bites as Treasury scraps MPAA cut 25 April 2017 A controversial decision to slash the Money Purchase Annual Allowance (MPAA) from £10,000 to £4,000 will be scrapped as the Treasury seeks to trim the Finance Bill. The policy, which was confirmed during the Spring Budget in March, came into effect on 6 April despite the industry decrying it as "further damaging trust" in pensions. However, the government has now tabled an amendment to the Finance Bill to remove the clause as it aims to pass it ahead of Parliament's dissolution on 3 May. The clause is likely to be removed during a debate on the bill on 25 April.