Is timing of date of triggering annual allowance reduction important?

Paul_Herring

pensionpawn wrote: »

Thanks for all the interesting replies everyone. So, just for clarification, the reduced annual allowance is £4k?

After tax relief, yes.

https://www.moneyadviceservice.org.uk/en/articles/money-purchase-annual-allowance

I thought it was £3600 because of the number of references I have seen to £2880 being grossed up to £3600? I have never reconciled the difference between these three amounts.

That's a different 'lower limit' that applies if you're not earning anything.

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/tax-relief-and-contributions

If you've triggered MPAA, but are not earning anything, you're restricted to this £3,600.
If you've triggered MPAA, and are earning between £3,600 and £4,000 then you're restricted to your gross wage.
If you've triggered MPAA, but are earning more than £4,000, then you're restricted to £4,000

Also, if the reduction only applies from the trigger date does it stand to reason that in this particular financial year you could contribute £36k to trigger day and continue to contribute £4k after it?

https://www.aegon.co.uk/support/faq/pension-technical/MPAA.html#ui-collapse-567 would indicate yes, however it smells of borderline sophistry, but then again I'm not sure HMRC would bother expending effort just to investigate that.

jamesd

Note the correction to my earlier post. In the year of triggering you get a limit of 36k before triggering and 4k after. You can do 40k but not all before triggering.

It isn't sophistry to do 4k after, it's the law described by HMRC:

"In the first tax year that the money purchase annual allowance applies, it is only pension input amounts for money purchase arrangements that occur following the date of the trigger event that are measured against the money purchase annual allowance test."