![]() ![]() The MPAA doesn’t apply to a dependent who saw their flexible drawdown arrangement convert to flexi-access drawdown on 6 April 2015. It is worth noting that the MPAA has also been available since 6 April 2015 to members who had withdrawn all their funds from their flexible drawdown arrangement(s) before 6 April 2015. However, contributions to money purchase arrangements are limited to the MPAA. This means they now have a full annual allowance, allowing them to contribute up to this limit without attracting an annual allowance tax charge. From 6 April 2015, on automatic conversion to flexi-access, such individuals are deemed to have flexibly accessed their benefits on 6 April 2015 regardless of whether they have taken income or whether the flexible drawdown policy still existed at 6 April 2015. Prior to 6 April 2015, anyone in flexible drawdown who wanted to make pension contributions had no annual allowance and therefore suffered an annual allowance tax charge on any contributions made. So, the option to take unlimited income withdrawals continued to be available to anyone who was previously in flexible drawdown. You can find out more about the MPAA in our Annual Allowance guide.įunds in flexible drawdown automatically converted to flexi-access drawdown on 6 April 2015. If a person takes a tax-free lump sum and no income, this doesn’t trigger the MPAA. Withdrawals of any amount up to the full fund can be taken at any time from a flexi-access drawdown fund so no GAD limits or regular income limit reviews apply (see our Capped drawdown article for further information about income limits).Ī money-purchase annual allowance (MPAA) is triggered when a person takes the first flexi-access drawdown income payment from their drawdown fund, (where they have gone into flexi-access drawdown after 5 April 2015 from a capped drawdown fund or from an uncrystallised fund). Any income taken is taxed at an individual’s marginal rate. It’s possible to take a tax-free lump sum (usually up to 25% or higher where lump sum protection applies) with the balance going into flexi-access drawdown. The options available in practice will depend on scheme rules. A member can choose to go into flexi-access drawdown from the age of 55 (or earlier, if a lower protected pension age applies or if the ill health conditions are met) as an alternative to purchasing an annuity or taking an Uncrystallised Funds Pension Lump Sum (UFPLS). You can withdraw 25% of your pension pot tax free and the remaining 75% is taxed as income.Flexi-access drawdown was introduced as an option from 6 April 2015. ![]() However, you should bear in mind that you could be drawing down from your pension for many years so you need to plan carefully to avoid running out of money. Under pension drawdown rules, there’s no limit to the amount you can withdraw from your pot at any one time. If your pot is valued at £30,000 or more, you’re legally obliged to seek advice if you’re considering a transfer. You should always consult an advisor before doing this as, in most cases, savers will be better off staying in their defined benefit scheme. If you have this type of pension and want to take a flexible income, you’d have to transfer your funds to a defined contribution scheme. You can’t access your money in this way if you have a defined benefit or final salary pension scheme. You can only access your money using pension drawdown if you have reached minimum pension age (this is currently 55 although this is increasing to age 57 in April 2028) and have a defined contribution pension (also known as a money purchase pension).
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