Timing of UFPLS within a tax year apropos reduced Employer Contributions

BobWelham

Adam intends soon to withdraw the maximum initial 25% UFPLS from his SIPP - his first ever withdrawal.
Adam is employed under PAYE but is over 75yr old and makes no employee SIPP contributions.
After UFPLS the maximum annual employer contribution to Adam's SIPP is reduced from 60,000 to 10,000.

Question:
Does the 10,000 employer contribution limit apply to the whole tax year in which the UFPLS occurs, taking no account of which of these two events precedes the other within that tax year?
Or, can the employer contribute (up to) 60,000 in that tax year, provided that all contributions are made before the exact date of the UFPLS withdrawal?

BobWelham

I think that I have found the answer  here:

https://adviserservices.fidelity.co.uk/pension-forum/ufpls-withdrawal-and-annual-allowance-tax-charge/

It seems that up to £60,000 can be contributed to the SIPP during the tax year provided that no more than £10,000 of it is contributed after UFPLS.

QrizB

BobWelham said:

Adam intends soon to withdraw the maximum initial 25% UFPLS from his SIPP - his first ever withdrawal.

Why do you think UFPLS is limited to 25%?

Doctor_Who

BobWelham said:

Adam intends soon to withdraw the maximum initial 25% UFPLS from his SIPP - his first ever withdrawal.
Adam is employed under PAYE but is over 75yr old and makes no employee SIPP contributions.
After UFPLS the maximum annual employer contribution to Adam's SIPP is reduced from 60,000 to 10,000.

Question:
Does the 10,000 employer contribution limit apply to the whole tax year in which the UFPLS occurs, taking no account of which of these two events precedes the other within that tax year?
Or, can the employer contribute (up to) 60,000 in that tax year, provided that all contributions are made before the exact date of the UFPLS withdrawal?

You confused me with 'maximum initial 25% UFPLS from his SIPP'. The maximum tax free cash is 25%, but my understanding is that the UFPLS can be anything upto the entire amount in the SIPP (at least it is with my SIPP, I'm asked if I want to UFPLS all of it or a certain amount).

Money Helper says:

The MPAA will only start to apply from the day after you’ve taken flexible benefits. This means any previous savings aren’t affected.

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

Dazed_and_C0nfused

Wondering if MPAA actually allows more to be contributed than would otherwise be possible for some people?

No carry forward whatsoever is available and £60k (gross) is contributed to a DC fund today.  Pensionable earnings are sufficient for this to qualify for tax relief in full.

Then later in the same tax year taxable funds are taken (not an annuity) from this DC pension triggering MPAA.

Can a further £10k (gross) be contributed to a DC pension in the remaining part of the same tax year 🤔

Doctor_Who

Dazed_and_C0nfused said:

Wondering if MPAA actually allows more to be contributed than would otherwise be possible for some people?

No carry forward whatsoever is available and £60k (gross) is contributed to a DC fund today.  Pensionable earnings are sufficient for this to qualify for tax relief in full.

Then later in the same tax year taxable funds are taken (not an annuity) from this DC pension triggering MPAA.

Can a further £10k (gross) be contributed to a DC pension in the remaining part of the same tax year 🤔

You think Adam is trying to be sneaky?

Interactive Investor says:

How does triggering the MPAA affect my annual allowance in the current year?

From the point where you trigger the MPAA, you can pay a further £10,000 into your pension over the rest of that tax year, providing you have earnings of at least £10,000. However, your contributions for that tax year as a whole will also be measured against your previous annual allowance of up to £60,000. 

https://www.ii.co.uk/pensions/contributions/mpaa-triggers

Dazed_and_C0nfused

Doctor_Who said:

Dazed_and_C0nfused said:

Wondering if MPAA actually allows more to be contributed than would otherwise be possible for some people?

No carry forward whatsoever is available and £60k (gross) is contributed to a DC fund today.  Pensionable earnings are sufficient for this to qualify for tax relief in full.

Then later in the same tax year taxable funds are taken (not an annuity) from this DC pension triggering MPAA.

Can a further £10k (gross) be contributed to a DC pension in the remaining part of the same tax year 🤔

You think Adam is trying to be sneaky?

Interactive Investor says:

How does triggering the MPAA affect my annual allowance in the current year?

From the point where you trigger the MPAA, you can pay a further £10,000 into your pension over the rest of that tax year, providing you have earnings of at least £10,000. However, your contributions for that tax year as a whole will also be measured against your previous annual allowance of up to £60,000. 

https://www.ii.co.uk/pensions/contributions/mpaa-triggers

Clearly not an option then!

BobWelham

QrizB said:

BobWelham said:

Adam intends soon to withdraw the maximum initial 25% UFPLS from his SIPP - his first ever withdrawal.

Why do you think UFPLS is limited to 25%?

I am likely using the unfamiliar acronyms wrongly!  🙁  
The scenario I am trying to describe is that Adam has built up a SIPP of let's say £400,000 and has never made a withdrawal.
He withdraws £100,000 tax free, let's say in October 2023, half way through the tax year.
He is over 75 and cannot make personal contributions, but in June 2023 his employer had made a contribution of £50,000.
My question was whether or not his employer could then make a further £10,000 contribution in the same tax year, say in January 2024.
From what I read on the Fidelity website, written by Paul Squirrell, the answer is yes they can.
However, from 2024-25 the limit will be £10,000 per tax year.
Apologies for any confusion spread.

dunstonh

Adam intends soon to withdraw the maximum initial 25% UFPLS from his SIPP - his first ever withdrawal.

UFPLS is a withdrawal that draws both the 25% and the 75%.    It isnt the 25% by itself.  That is drawdown.

Does the 10,000 employer contribution limit apply to the whole tax year in which the UFPLS occurs, taking no account of which of these two events precedes the other within that tax year?

No.  It is triggered on a date and only applies after the date.  However, drawing only the 25% element doesnt trigger tha MPAA.

My question was whether or not his employer could then make a further £10,000 contribution in the same tax year, say in January 2024.

is there any carry forward allowance available?

BobWelham

dunstonh said:

Adam intends soon to withdraw the maximum initial 25% UFPLS from his SIPP - his first ever withdrawal.

UFPLS is a withdrawal that draws both the 25% and the 75%.    It isnt the 25% by itself.  That is drawdown.

Does the 10,000 employer contribution limit apply to the whole tax year in which the UFPLS occurs, taking no account of which of these two events precedes the other within that tax year?

No.  It is triggered on a date and only applies after the date.  However, drawing only the 25% element doesnt trigger tha MPAA.

My question was whether or not his employer could then make a further £10,000 contribution in the same tax year, say in January 2024.

is there any carry forward allowance available?

Apologies for my inaccurate use of 'UFPLS'.
To your final question - no carry forward is available.

Thanks for your knowledgeable post.