What is a Money Purchase Annual Allowance?

The Money Purchase Annual Allowance (MPAA) limits the amount you can pay into your pension and still receive tax relief. For most people, the amount that can be paid into their pension pots each tax year, on which they receive tax relief including contributions from their employer, is £40,000. Once you trigger the MPAA, this sum reduces to £4,000 a year. You will activate the MPAA if you start withdrawing from a defined contribution pension, move your pension into a flexi-access drawdown pension pot and start taking an income, or take the entire pension pot as a lump sum.

Related terms
What is a Money Purchase Plan
What is an Open Market Option
What is an Annuity
What is Fixed Term Annuity
What is an Enhanced Annuity (aka impaired annuity)
What is Joint-Life Annuity
What is a Guarantee Annuity Rate