The introduction of the Money Purchase Annual Allowance (MPAA) was a part of the 2014 Taxation of Pensions Act. The MPAA was intended to deter individuals from abusing flexible pension rules to avoid tax. Starting in April 2017 the allowance figure for a MPAA, will reduce from £10,000 to £4,000. This change has suggested the initial pension freedoms since April 2015 may no longer be as adaptable for certain individuals. A tax charge for the 500,000 people who have accessed pension freedoms since April 2015; where contributions are above the annual allowance to a money purchase (defined contribution) scheme, will apply. Those affected by this change, may have to think long and hard about what impact withdrawals will have on their pension allowance.
