Accidentally Triggered MPAA

avodavo

Hi All.

I was devastated to discover that I’ve accidentally triggered my MPAA and reduced it to £4000. My company closed our DB scheme and opened a DC scheme, at the same time I opened a SIPP for some savings. I saved about £1300 from memory, and last year decided to close the account. Earlier this year I started drawing my DB pension and paid the equivalent from my wages into the DC scheme, I did have a letter(which I didn’t understand and assumed that as the amount was so small it wouldn’t be relevant) from the SIPP provider last year, saying I show inform any other DC scheme that I was a member of, which I did. Last month I received a letter from my company DC scheme saying I may have exceeded my MPAA. So for closing that account last year, I cannot now pay any AVC’s into my company DC scheme, owe tax on the amount over my MPAA, and will move into the 40% tax bracket. Thank you for reading, any advice gratefully received. 

dunstonh

It is a long shot but could you go back to the SIPP provider and ask them why they did not close it under the small pots rule? 

They have not done anything wrong as they take instructions from you and if you pick the wrong method, it is your responsibility.   However, they may be able to redo the administration to reclassify it as a small pots withdrawal.   Sometimes they can do things like this if it is caught within the same tax year.

The small pots rule doesnt trigger the MPAA.

avodavo

Thank you, I will ask. 

sandsy

When you first take money out of a pension regulated by the FCA, such as a SIPP, you should be given some warnings about the implications of doing so. Can you recall if you received anything, in writing or on the phone, about the implications of taking everything out in full?

avodavo

I did receive a letter that mentioned I needed to inform any other DC scheme I was in and it mentioned the MPAA (being reduced, which I didn’t understand (then) what the massive implications would be to me. I assumed (wrongly) such a trivial amount wouldn’t have such extensive consequences. 

Marcon

avodavo said:

I did receive a letter that mentioned I needed to inform any other DC scheme I was in and it mentioned the MPAA (being reduced, which I didn’t understand (then) what the massive implications would be to me. I assumed (wrongly) such a trivial amount wouldn’t have such extensive consequences. 

The word 'assume' crops up so regularly on this board, and never in a good way. I hope your SIPP provider will be able to reclassify as a withdrawal under the small pots regime - have you asked them yet? If not, worth getting on and doing so in the hope they might be able to assist.