However, the client could, before the summer Budget ended the ability to do so, nominate to close their PIP at an earlier date , so, they nominated 30 May 2015. Q: If I will be subject to a tapered annual allowance for the current tax year, at what date can I calculate my actual annual allowance so I can maximise my contribution for tax relief purposes before the end of the tax year? Read more about this in our article on the Money Purchase Annual Allowance. A: No. The money-purchase annual allowance allows you to receive tax relief on contributions of up to 100% of your earnings or £4,000, whichever is the lower. Bob has a SIPP, he has not paid any contributions to this for the last 3 years, and decides to help his daughter buy her first home. To arrive at the taxable profit there are various finance costs which can be deducted, although these are to be phased out, covered in “Comparing pension and buy-to-let property for retirement planning”. Since the announcement in the Autumn Statement on 23 November 2016 of a consultation, proposing the reduction of this allowance from £10k to £4k from 6 April 2017, our technical helpline has received a barrage of calls. This exercise should be documented and evidence retained by the client in case of a request from HMRC to complete their audit. Pensions simplification brought us the ‘annual allowance’ for pension savings, on 6 April 2006. This website uses cookies. This means the amount available is £30,000. You have to fully use the current year’s allowance i.e. Additionally, any unused MPAA in a tax year cannot be carried forward. However, for those also subject to the tapered annual allowance, this amount will be the tapered amount less £10,000, which means it will be somewhere between £0 and £30,000. A: This is only relevant historically now as it dates back to 9 July 2015 and the announcement for the introduction of the Pension Input Period transitional rules. The answer to this question... 5 minutes with… Anthony Rafferty, Managing Director, Origo. For UK financial advisers only, not approved for use by retail customers. A: We would say yes, because if your threshold income works out at less than £200,000 you would not be impacted by the tapered annual allowance rules (as you need to breach both limits to be impacted). The Money Purchase Annual Allowance (MPAA) The Money Purchase Annual Allowance was introduced on 6th April 2015 and was set at £10,000 gross p.a. The second contribution was paid in a pension input period that was scheduled to end on 30 May 2016. When we get an update on the new rules we will update you! For a small pot payment from an occupational pension scheme, the payment must not be greater than £10,000 and it must extinguish all benefits under the scheme. AJ Bell Investcentre Adviser guide - Money Purchase Annual Allowance (MPAA) guide 3 Case study 1 – Harry – within AA and MPAA • One-off employer contribution of £30,000 on 6 April 2020 • Flexibly accesses benefits on 1 October 2020 • A personal contribution of £4,000 (£3,200 net) The client and their adviser should add up all pension savings made in the pension input periods ending in the tax year. Bob has a MPAA of £10,000 so this gives him an annual allowance excess of £10,000. Tax year Annual allowance Money purchase annual allowance; 2020/2021: £40,000: £4,000: 2019/2020: £40,000: £4,000: 2018/2019: £40,000: £4,000: 2017/2018: £40,000 Jane is a member of her employer’s group personal pension scheme. The client needs to declare this through a self-assessment tax return, although as the charge exceeds £2,000 they could ask the scheme to pay at least some of the tax charge using 'Scheme Pays'. INCLUDING: Business Property Relief Social  Eight pages of insight into when and how BPR may be used within financial and... VIEW ONLINE If the £36k contribution was paid as a personal contribution, then this client actually had a tapered annual allowance of £10,000 (40,000 – [(300,000 – 240,000)/2]). Let’s look at an example. To move through our carousel of videos and podcasts just click on the squares below. The scheme must provide the relevant statement by 6 October following the end of the tax year. Will her annual employer pension contribution of £5,000 paid on 28th April this year be tested against the £4,000 limit? Our MPAA article covers the reporting requirements on the scheme and member when there has been an MPAA trigger event. Thirty five paraplanners from across the South-West joined us at the Aztec Hotel & Spa for an educational seminar. Money purchase annual allowance. Use it or lose it! A: Yes. Technically you will be unable to calculate your actual adjusted income until after the end of the tax year. This will ensure you have the input amounts to hand and can work out any unused annual allowance they have available or if they need to report and pay an excess charge. The government introduced an £80k limit in the pre-alignment tax-year, with restrictions preventing members from using the full unused amount in the post-alignment period (the maximum allowed to be carried forward was limited to £40,000). Let’s work through an example of where this would have been the case: Before the Budget in July, a client who had sufficient income, chose to pay £80,000 into their pension plan before the end of the 2015/16 tax year. In this tax year, the MPAA limit of £4,000 applies for all members who have flexibly accessed their own pension pots since 6 April 2015 or who held a flexible drawdown arrangement prior to 6 April 2015. Before pension contribution planning with affected clients, particularly where you think they may have an unidentified annual allowance excess in a previous tax year, you may want to contact these clients to ask them to request pension savings statements. We have three great days lined up for you at each of our events - featuring plenary sessions and workshops – and we look forward to seeing you there. The Supreme Court has ruled that a pension transfer made in ill health should not be subject to inheritance... How to make the most of your annual review meeting. Q: My client received a letter confirming they triggered the Money Purchase Annual Allowance on 5th April 2019. If you calculate threshold income first (which is slightly less onerous), then it’s only where this exceeds £200,000 that you need to determine your adjusted income figure. This is only relevant historically now but, where you had a PIP prior to the 2015/16 transitional rules announcement and, for example, say it started on 2 May and ended on 1 May, however you transferred the pension fund in December, you would still take into account pension contributions paid from 2 May up to the date of transfer which would be tested against the annual allowance for the tax year in which the 1 May original PIP end date falls.

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