MPPA not triggered 5 March at 11:55AM in Pensions, annuities & retirement planning 7 replies 257 views

Spivo46

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?

Pat38493

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

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

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.

xylophone

MPAA relates to "flexible" access.

See

https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/money-purchase-annual-allowance-mpaa

https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/money-purchase-annual-allowance-mpaa

Spivo46

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

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.

dunstonh

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.