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Canada Life Article - 2016 Budget Commentary

Reduction in the Money Purchase Annual Allowance

As expected the Money Purchase Annual allowance (MPAA) will reduce from its current rate of £10,000 to the new proposed value of £4,000, following on from the consultation that ended back in February, with the Government planning to legislate in the Finance Bill 2017. So what will this mean for those clients looking to flexibly access benefits and continue to contribute to a money purchase pension or those who had previously triggered the MPAA under the £10,000 limit who are still contributing to a money purchase pension? The Government will publish a response to the consultation on 20 March 2017.


Now individuals will have to be a lot more careful if they intend to continue to contribute to either a personal or workplace money purchase pension scheme. The new lower £4,000 figure only equates to a personal contribution of £333.33 gross a month and if you factor in any employer contribution as well it’s not hard to imagine some individuals getting close to or even breaching this limit.


So where a client does envisage further contributions being paid into a money purchase plan in the foreseeable future, consideration will need to be given as to whether to delay flexibly accessing any benefits or exploring alternative ways to access pension benefits to ensure that the MPAA is not triggered.


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