Quick but perhaps obscure question - if I trigger MPAA (by beginning to drawdown my pension) today, does the MPAA contribution limit of £4,000 apply from today onwards or is it backdated to the beginning of this tax year?
What I want to do is pay in, say £10,000, to my pension, get the tax relief, then trigger MPAA some days later (but within this tax year) and hope that HMRC don't come looking to reclaim most of my tax relief already granted on the £10K contribution.
HMRC seem to say no I can't: "If a trigger event occurs, the money purchase annual allowance test will apply for the tax year in which the event occurs and in subsequent tax years." https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm056520
Aegon say yes I can: "In the first tax year that the MPAA applies, it is only contributions paid to money purchase arrangements after the date of the first trigger event that are measured against the MPAA. For subsequent tax years, all contributions made to money purchase arrangements in a tax year will count towards the MPAA….The contributions paid before or on the trigger date will be measured against the alternative annual allowance. Those paid after the trigger date are measured against the MPAA." https://www.aegon.co.uk/support/faq/pension-technical/MPAA.html#expandable-item-15684
Aegon go on to give a worked example in that link, they seem quite clear.
Thanks if anyone knows.
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MPAA trigger date, backdated to start of tax year?
Re: MPAA trigger date, backdated to start of tax year?
Here's the best I can get from HMRC that supports Aegon's view:
"First flexible access and the annual allowance.
First flexible access on or after 6 April 2015 immediately triggers the money purchase annual allowance rules. These rules limit the amount of tax relief the member can get on future savings to any money purchase arrangement."
https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm062710#IDAV3HIC
Not remarkably clear but the key words may be "on future savings.." 'future' being after the trigger date and implying it is not backdated to the begining of the tax year.
"First flexible access and the annual allowance.
First flexible access on or after 6 April 2015 immediately triggers the money purchase annual allowance rules. These rules limit the amount of tax relief the member can get on future savings to any money purchase arrangement."
https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm062710#IDAV3HIC
Not remarkably clear but the key words may be "on future savings.." 'future' being after the trigger date and implying it is not backdated to the begining of the tax year.
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Re: MPAA trigger date, backdated to start of tax year?
Well the following sources seem to agree:
"The MPAA will only start to apply from the day after you’ve taken flexible benefits. This means any previous savings aren’t affected."
https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/money-purchase-annual-allowance-mpaa
"From the point where you trigger the MPAA, you can pay a further £4,000 into your pension over the rest of that tax year. However, your contributions for that tax year as a whole will also be measured against your previous annual allowance of up to £40,000."
https://www.ii.co.uk/pensions/contributions/mpaa-triggers
However, I would check with your pension scheme, as they will be the first to notice (assuming this is all one scheme) and are the ones obtaining the tax relief.
"The MPAA will only start to apply from the day after you’ve taken flexible benefits. This means any previous savings aren’t affected."
https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/money-purchase-annual-allowance-mpaa
"From the point where you trigger the MPAA, you can pay a further £4,000 into your pension over the rest of that tax year. However, your contributions for that tax year as a whole will also be measured against your previous annual allowance of up to £40,000."
https://www.ii.co.uk/pensions/contributions/mpaa-triggers
However, I would check with your pension scheme, as they will be the first to notice (assuming this is all one scheme) and are the ones obtaining the tax relief.
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