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Money purchase annual allowance

Produced by Tolley in association with
Employment Tax
Guidance

Money purchase annual allowance

Produced by Tolley in association with
Employment Tax
Guidance
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Introduction

The annual allowance in relation to registered pension schemes is the maximum amount:

  1. •

    by which a member’s benefits can increase in a pension input period (PIP) (in respect of defined benefit schemes)

  2. •

    that can be contributed to pension arrangements in a PIP (for defined contribution or money purchase schemes)

without risk of the member suffering a tax charge on this increase in a member’s benefits / amounts contributed.

If the annual allowance is exceeded in a tax year, the individual is at risk of suffering a tax charge (the annual allowance charge). See the Annual allowance charge guidance note.

The purpose of the annual allowance is to set a limit on the extent to which people are able to accumulate additional tax privileged pension funds between one year and the next. So long as these pension inputs do not exceed the annual allowance then tax relief will be granted on the contributions made.

In order to reduce the risk of funds being recycled as a consequence of the introduction of

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David Everett
David Everett

Partner, Lane Clark & Peacock , Employment Tax


David Everett, is the head of the Pensions Research team at LCP. One of his key roles is to analyse and communicate regulatory and professional developments to audiences both within and outside LCP.David has built up many years of experience in the occupational pensions regulatory field covering a broad spectrum including government policy and legislation, particularly that emanating from the Department for Work and Pensions, the Pensions Regulator, the Pension Protection Fund and other compensation schemes, the Pensions Ombudsman and the Courts and the technical and ethical regulation of actuaries through the Financial Reporting Council and the Institute and Faculty of Actuaries respectively.He also assists the ACA in responding to government consultations.He's the editor of LCP's weekly Pensions Bulletin and undertakes other technical writing for the firm, as well as contributing to TolleyGuidance Employment taxes for the Pensions module.

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