When will the Chancellor cut your pension allowance?
We reported in our previous briefing that Philip Hammond confirmed that the Money Purchase Annual Allowance was reducing from £10,000pa to £4,000pa from 6 April 2017.
However on 25 April 2017, the Government announced that some clauses in the Finance Bill 2017 would be dropped to allow time for the Bill to come into force before Parliament dissolved on 3 May. Included is the clause reducing the MPAA from £10,000pa to £4,000pa.
The Government has stated its intention to re-introduce the dropped clauses after the general election.
At the moment it's unclear whether the clause will be re-introduced with retrospective effect back to 6 April 2017, as originally intended, or whether the introduction of the reduction will be postponed until 6 April 2018.
Until that's clarified it's safer to assume that the reduction to £4,000 will be re-introduced with an effective date of 6 April 2017: catch-up contributions can always be made if it turns out to be a later date.
John Dowding Dip PFS
Technical Director
Morgan Lloyd Administration Limited
Jargon Buster
Money Purchase Annual Allowance (MPAA) – if you have taken any form of taxable income from your pension fund (tax free cash doesn't count), then the maximum pension contribution that you can pay to your SSAS or SIPP reduces to £10,000pa
The information above is based on our understanding of the legislation applicable to UK Registered Pension Schemes, and HM Revenue & Customs rules. It is provided as a summary only and should not be taken as advice - Morgan Lloyd SIPP Services Ltd and Morgan Lloyd Administration Ltd are not authorised to give financial advice and will not be responsible for any decision or action taken as a result of relying on this information. If you are a retail client you should seek financial advice from a financial adviser who is authorised by the Financial Conduct Authority and/or seek guidance from the Government’s Pension Wise service.
