As from 6 April 2017, the Money Purchase Annual Allowance (MPAA) is being reduced from £10,000 to £4,000.
The MPAA limit is intended to discourage people from flexibly accessing money from their pension(s) and avoiding tax on their current earnings by diverting their salary as contributions into their pension scheme and claiming tax relief, thereby effectively withdrawing 25% tax-free.
If you have flexibly accessed* your pension, either with James Hay Partnership or another money purchase provider, the new MPAA limit will apply to you. It is important to note, therefore, that with effect from 6 April 2017 if you contribute more than a total of £4,000 in any tax year to your James Hay SIPP (or another money purchase pension), you may be subject to an annual allowance tax charge.
We recommend that you speak with a regulated financial adviser if you have any queries regarding the change and whether it may be relevant to your personal circumstances. If you do not have a financial adviser but would like to speak to one, please visit www.unbiased.co.uk or call them on 0800 023 6868 to obtain a list of financial advisers local to your area.
* Flexibly accessing your pension includes taking income under flexi-access drawdown or taking an uncrystallised funds pension lump sum.