Answers · UK 2025/26

What is the Money Purchase Annual Allowance in 2026/27?

The Money Purchase Annual Allowance (MPAA) restricts how much you can contribute to a defined contribution pension tax-efficiently, once you have started drawing a taxable income from a pension, dropping from the standard £60,000 annual allowance to just £10,000 for 2026/27. Taking only your tax-free lump sum, without any taxable income withdrawal, does not trigger the MPAA.

Last updated: 2 July 2026Last reviewed: 2 July 2026How we verify

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The MPAA is a significant restriction for anyone considering both accessing their pension income and continuing to make substantial pension contributions, such as those who retire partially or return to work after initially accessing their pension. **What triggers the MPAA** The reduced £10,000 allowance is triggered specifically by taking a TAXABLE income withdrawal from a defined contribution pension -- this includes drawdown income withdrawals, UFPLS withdrawals (the taxable 75% portion), or most annuity purchases that provide flexible or reducible income. Simply taking your 25% tax-free lump sum, without drawing any further taxable income, does NOT trigger the MPAA. **Why this matters for continued working** If you access pension income but continue working (or return to work) and want to keep contributing meaningfully to a pension, the £10,000 MPAA significantly limits how much you can pay in with full tax relief, compared with the standard £60,000 annual allowance most people enjoy if they have not yet accessed taxable pension income. **What counts toward the £10,000 limit** The MPAA applies specifically to contributions into DEFINED CONTRIBUTION pensions (not defined benefit/final salary schemes, which have different rules) -- both your own contributions and any employer contributions count toward the combined £10,000 limit once triggered. **Exceeding the MPAA has tax consequences** If you contribute more than £10,000 to defined contribution pensions after triggering the MPAA, the excess is subject to an annual allowance tax charge, effectively clawing back the tax relief on the excess contribution -- this can create an unexpected tax bill if you are not aware the MPAA has been triggered. **Ways to avoid triggering it unnecessarily** If you want to access some pension funds while preserving your ability to contribute more in future, consider taking only the tax-free 25% lump sum initially (which does not trigger the MPAA), or explore whether a small pot withdrawal (which has different, more limited rules) might suit your immediate cash need without affecting your ongoing contribution allowance. **Worked example** Someone aged 58 takes £15,000 as a UFPLS withdrawal from their pension (£3,750 tax-free, £11,250 taxable) to help with a specific expense, while continuing to work part-time. This taxable withdrawal triggers the MPAA, meaning their pension contribution allowance for that and future tax years (while still working) drops from £60,000 to £10,000 -- if their employer also contributes, both employee and employer contributions combined must stay within this £10,000 cap to avoid a tax charge. **MPAA and pension carry forward** Once the MPAA is triggered, you also lose the ability to use pension carry forward (bringing forward unused annual allowance from previous years) for your defined contribution pension savings, further restricting your ability to make large "catch-up" contributions in a single year. **Practical tip** If you are considering accessing pension funds while still working and wanting to continue meaningful pension contributions, get financial advice before making any taxable withdrawal, since triggering the MPAA is generally irreversible and can significantly limit your future tax-efficient pension saving capacity for the rest of your working life.