What is the Money Purchase Annual Allowance (MPAA)?

Full answer

The Money Purchase Annual Allowance (MPAA) is a reduced pension contribution limit that applies once you have flexibly accessed a defined contribution (money purchase) pension. For 2026/27 the MPAA is GBP10,000. What triggers the MPAA: taking income from a flexi-access drawdown fund; taking an Uncrystallised Fund Pension Lump Sum (UFPLS); taking any income from a capped drawdown fund that exceeds the cap limit; purchasing a flexible annuity that can decrease; or receiving income from a scheme pension that has reduced. What does NOT trigger the MPAA: taking tax-free cash (the pension commencement lump sum of up to GBP268,275 or 25% of the fund) alone; annuity purchase; taking small pension pots (under GBP10,000 trivial commutation); or State Pension. Once triggered, the MPAA limits your total contributions to defined contribution pensions to GBP10,000 per year (employer plus employee combined). There is no carry-forward available for MPAA -- once triggered, you cannot use unused allowances from previous years to exceed GBP10,000 in a DC pension. However, the standard GBP60,000 annual allowance (or tapered allowance if applicable) still applies to defined benefit (DB) pension accrual -- the MPAA does not restrict DB accrual. If you have both DC and DB pensions, you must ensure DC contributions stay within GBP10,000 AND total DC + DB pension saving stays within the overall annual allowance (with an alternative calculation if both are in play). Notification: your pension provider must notify you that you have triggered the MPAA, and you must notify any other pension scheme within 91 days. Exceeding the MPAA triggers an annual allowance charge at your marginal rate of Income Tax.

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