MPPA not triggered

So if you buy a lifetime annuity and it not set to increase you can take pension payments and still pay up to £40k (or your annual salary) in your other pension fund going forward? Why is that a different rule to the standard drawdown rules?

Comments

  • Pat38493
    Pat38493 Posts: 3,236 Forumite
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    I thought that even if the annuity is set to increase it’s the same as long as the increase is inflation or fixed %?

    The MPAA is triggered when you take taxable and “flexible” benefits from your pension which usually means drawdown or UFPLS as far as I understood.
  • molerat
    molerat Posts: 34,292 Forumite
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    I suspect it is because when you use the taxable element to buy an annuity it effectively becomes a DB pension so treated the same.
  • Linton
    Linton Posts: 18,071 Forumite
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    edited 5 March 2023 at 12:26PM
    Buying an annuity does not trigger the MPAA.

    The MPAA is a pretty crude way of preventing people continuously avoiding paying tax by circulating the same large sum of money through the pension process.  I assume annuities aren't included as you can't pass a large lump sum through an annuity so it does not provide an opportunity for serious recycling.

    HMRC have the problem that they want to prevent large scale recycling but do not want to make normal financial management difficult so the options they have are somewhat limited.
  • Spivo46
    Spivo46 Posts: 156 Forumite
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    edited 5 March 2023 at 1:13PM
    Pat38493 said:
    I thought that even if the annuity is set to increase it’s the same as long as the increase is inflation or fixed %?

    The MPAA is triggered when you take taxable and “flexible” benefits from your pension which usually means drawdown or UFPLS as far as I understood.
    I think you are correct. If the annuity payment increases over time the MPPA than comes into play
  • Marcon
    Marcon Posts: 13,798 Forumite
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    Spivo46 said:
    Pat38493 said:
    I thought that even if the annuity is set to increase it’s the same as long as the increase is inflation or fixed %?

    The MPAA is triggered when you take taxable and “flexible” benefits from your pension which usually means drawdown or UFPLS as far as I understood.
    I think you are correct. If the annuity payment increases over time the MPPA than comes into play
    No, it doesn't. If you take 25% tax free and immediately use the rest of your 'pot' to buy an annuity, the MPAA isn't triggered. The annuity can be level, increasing, own life or you can provide a spouse's pension.
    Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!  
  • dunstonh
    dunstonh Posts: 119,231 Forumite
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    So if you buy a lifetime annuity and it not set to increase you can take pension payments and still pay up to £40k (or your annual salary) in your other pension fund going forward? Why is that a different rule to the standard drawdown rules?
    It doesnt matter what the terms of the lifetime annuity are.  i.e. level, RPI, CPI, fixed indexation etc  It just needs to be a lifetime annuity or scheme pension.  Neither of which are drawdown.  hence they are they are different to drawdown.


    I think you are correct. If the annuity payment increases over time the MPPA than comes into play
    No it doesn't.  



    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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