Pension - Notification of Reduced Annual Allowance ??

Rich1964

I am retired and dont have an income other that money that I take from two private pensions (one is defined contribution and one is defined benefit).  I have just taken my first payment from defined contribution scheme and started taking payments form the defined benefit scheme late last calendar year.  I have received a letter from my DC pension provider telling me that my annual allowance has reduced - Im not sure that I understand as the payments that I take from both pensions combined is less than the UK personal tax allowance (as I have no other income) and I dont make any new contributions into either of the pensions ... its all a mystery at the minute

boingy

I'm guessing you're talking about the MPAA:

Money purchase annual allowance (MPAA) | MoneyHelper

Mark_d

Your DB scheme will be taxed against an annual allowance of 12570.

Suppose you take 10k from your DB scheme, then your DC payments will be assessed against a reduced allowance of 2570.  You have nothing to worry about.

eskbanker

Rich1964 said:

I have received a letter from my DC pension provider telling me that my annual allowance has reduced - Im not sure that I understand as the payments that I take from both pensions combined is less than the UK personal tax allowance (as I have no other income) and I dont make any new contributions into either of the pensions ... its all a mystery at the minute

If you share more of the exact wording used then it should be possible to clarify what it means but MPAA does sound favourite at the moment....

Rich1964

Just to clarify it is in relation to my money purchase annual allowance statement

boingy

It's mostly to stop you taking out the tax-free lump sum then putting it straight back in again to get a second lot of tax relief. It's been dubbed, rather unimaginatively, "pension recycling".

Rich1964

Okay, cheers.  The letter was my Money Purchase Annual Allowance statement that followed my first drawdown

boingy

Yep, drawdown triggers it.

Rich1964

Okay cheers - So the letter has been triggered by me taking the first drawdown and informs me that the Money Purchase Annual Allowance (MPAA) limit has now been reduced, ie. what can be paid into scheme by me or for me in future. It does not affect what Im taking out of any pension scheme.

Albermarle

Rich1964 said:

Okay cheers - So the letter has been triggered by me taking the first drawdown and informs me that the Money Purchase Annual Allowance (MPAA) limit has now been reduced, ie. what can be paid into scheme by me or for me in future. It does not affect what Im taking out of any pension scheme.

Correct, it has no effect on withdrawals at all.

charlie12525

I believe that you are supposed to inform any other DC pension providers you have  a pension with that you have triggered the MPAA. Doesn't apply to you if you have no other DC pensions.