Money purchase annual allowance explained
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Quick answer: Once you flexibly access a defined contribution pension, the money purchase annual allowance usually cuts tax-relieved contributions to £10,000 a year instead of £60,000.
The MPAA stops people recycling pension withdrawals back in for extra tax relief. HMRC applies it when you take taxable flexible income, not necessarily on every withdrawal. This guide explains triggers and planning.
Last reviewed:
Read the full pensions & retirement guide →Primary source: www.gov.uk/tax-on-your-private-pension/annual-allowance
What triggers MPAA
Flexibly accessing pension savings — such as taking taxable drawdown income — triggers MPAA from that date. Your scheme should provide a flexible access statement.
Buying a flexible annuity or certain transfers can also trigger it. Taking only capped drawdown before April 2015 rules may differ — check with your provider.
What still counts as contribution
Employer and employee pension payments count toward MPAA. Even if you stopped personal payments, employer auto-enrolment still builds up and could exceed £10,000.
You may need to opt down or leave the scheme if contributions breach MPAA and you cannot carry forward enough allowance. Employer auto-enrolment contributions count toward the £10,000 limit even if you stop paying in yourself.
Planning around MPAA
If you might return to work and want full allowance, delay flexible access until you finish contributing. Some people use ISA savings instead after retiring.
Track all pension inputs across jobs — MPAA is per person, not per scheme. Multiple part-time jobs could each contribute to breaching the limit without you noticing.
Common questions
Does taking 25% tax-free cash trigger MPAA?
Not on its own if you take only the tax-free lump sum and leave the rest uncrystallised, but mixing with flexible income triggers it.
Can I reset MPAA?
No. Once triggered, MPAA applies for life to future tax-relieved contributions unless rules change.
What if I exceed £10,000?
You pay an annual allowance charge on the excess through Self Assessment unless you use carry forward from earlier years within MPAA limits.