Money Purchase Annual Allowance and Defined Benefit Pensions
Published / Last Updated on 23/10/2019
Does the Money Purchase Annual Allowance affect Defined Benefit Pension Schemes?
Annual Allowance: You and your employer comboned can pay up to £40,000 a year (or 100% of your salary) into a pension scheme and get tax relief on contributions.
Money Purchase Annual Allowance or MPAA: if you start to take money from a defined contribution pension, the amount you can pay into a pension and still get tax relief reduces - MPAA.
MPAA does not apply if:
- Take a tax-free cash lump sum and buy a lifetime annuity
- Take a tax-free cash lump sum only flexible drawdown scheme
- but don’t take any income from it
- Cash in a whole 'small pension pot' worth £10,000 or less
MPAA applies to defined contribution pensions only and not defined benefit pensions.
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