MPAA notice

lake888

My husband has just initiated a drawdown of his DC pension and has received a letter from the provider telling him to tell any other pension providers (including those linked to current or past employment) that he has now subject to the MPAA.  His only other pension is a LGPS DB pension.  He is a deferred member, no longer contribute to the scheme.  Does he need to tell them?  Thanks.

dunstonh

You have to notify any pension that you set up from now on or any pension you contribute to.  So, based on what you have said, no, he doesn't need to tell them.

lake888

Thanks @dunstonh He only paid in £2880 to this DC pension this year as he is no longer working.  By the way does the pension input amount in his DB pension affect anything at all?

NedS

lake888 said:

Thanks @dunstonh He only paid in £2880 to this DC pension this year as he is no longer working.  By the way does the pension input amount in his DB pension affect anything at all?

The MPAA only applies to DC pensions, not DB pensions. As a non-earner, he will be limited by the £3600 gross / £2880 net limit for a non-earner, with is lower than the £4000 gross MPAA limit.

The DB pension input amount is still relevant to the Annual Allowance though, just not the MPAA. But as a non-earner, the annual allowance is unlikely to trouble him.

lake888

Thanks @NedS I'm just thinking after the £2800 (£3600) pension contribution, the Annual Allowance is only left with £400.  Although he and his employer are not contributing anymore, will the pension input amount be most likely to be zero?

NedS

lake888 said:

Thanks @NedS I'm just thinking after the £2800 (£3600) pension contribution, the Annual Allowance is only left with £400.  Although he and his employer are not contributing anymore, will the pension input amount be most likely to be zero?

There are 3 separate limits in play, all of which must be adhered to independently.

1. The earnings limit. He cannot contribute more than he earns. If he has no earnings, then he cannot contribute more than £3600 gross (£2880 net)

2. The MPAA limit of £4000. This only applies to DC pensions, not DB pensions. As long as he is a non-earner, this will not affect him as he will be bound by the earnings limit having maximum contributions of £3600 gross. If he has earned income, he cannot contribute more than £4000 gross to a DC pension.

3. The Annual Allowance limit of £40,000. Again this is not going to be relevant as long as he remains a non-earner, or earns less than £40,000.

With respect to the Annual Allowance, and DB pension input amounts - they are only relevant if he is an active member of the scheme and has made contributions in that tax year. If he is a deferred member and has made no contributions in the tax year, then such DB pensions are disregarded for Annual Allowance calculations. If he were to return to employment with earnings of £40,000 or more per year, he could contribute £4,000 to a DC pension (limited by MPAA) and up to the remaining £36,000 (by pension input amounts) into an employer DB pension scheme.