Glossary · UK
What is Money Purchase Annual Allowance (MPAA)?
A reduced Annual Allowance of £10,000 that applies once you have flexibly accessed a defined contribution pension.
Full Definition
The Money Purchase Annual Allowance (MPAA) is a sharply reduced pension contribution limit that applies once you have flexibly accessed a defined contribution (DC) pension. The MPAA for 2026/27 is £10,000. It was introduced to prevent people from recycling pension income back into a pension and claiming tax relief twice. Flexible access that triggers the MPAA includes: taking income from a flexi-access drawdown arrangement; receiving an Uncrystallised Fund Pension Lump Sum (UFPLS); or annuity payments from a flexible annuity. Events that do NOT trigger the MPAA include: taking a Pension Commencement Lump Sum (tax-free cash) as long as no income drawdown starts at the same time; receiving a small pot lump sum; death-in-service lump sums; and trivial commutation payments. Once triggered, the MPAA applies to all money purchase (DC) contributions — including those from an employer. Unlike the standard Annual Allowance, the MPAA cannot be enhanced by carry forward of unused allowance from prior years. Defined benefit (final salary) pension accrual is tested against a separate Alternative Annual Allowance of £50,000 (£60,000 minus the £10,000 MPAA) if you are also in a DB scheme. The MPAA rule exists to prevent people in drawdown from benefiting disproportionately from pension tax relief while also accessing pension funds.