What is the Money Purchase Annual Allowance?
01 October 2025
Question by Peter
What triggers when you're "retired" and can then only pay in a smaller amount tax-free to your pension? I've seen mention of something called "Money Purchase Annual Allowance (MPAA)" but don't know what it is.
Answered by Mark Williams
Hi Peter,
This is a question that we often hear.
You trigger the so-called MPAA when you start taking taxable income flexibly from your pension. Not just the 25% tax-free lump sum, but actual income. This includes:
Note however that if you just take your tax-free cash entitlement or buy a plain old annuity, that alone doesn’t trigger the MPAA.
Once triggered, your annual pension contribution limit plummets from £60,000 to just £10,000. As always, generally your contribution allowance will also be capped at the level of your earnings if this is lower than these upper limits.
What’s more, once the MPAA is triggered, you also lose the ability to carry forward unused allowance from previous years.
So, if you're still working or planning to top up your pension, triggering the MPAA could seriously inhibit your ability to continue saving tax-efficiently into your pension.
Hope this helps.
