Where a client has a need for capital but wishes to continue funding in future then PCLS can be paid with the balance being vested to drawdown. This will not trigger the MPAA until income is taken from the drawdown plan. A designation of pension death benefits for flexi-access drawdown does not trigger the MPAA.
What will trigger the MPAA?
The MPAA is triggered when you withdraw income from a defined contribution pension scheme, not including any tax-free lump sums you are entitled to. It is designed to limit the amount you can benefit from tax relief after retirement. If you exceed the MPAA, you may face a tax charge.
How do I avoid MPAA?
How can you avoid triggering MPAA?
- You take a tax-free lump sum and buy an annuity that gives you a guaranteed minimum income.
- You take a tax-free lump sum from your pension pot and set up a drawdown scheme but don't yet take any income from the drawdown scheme.
- You cash in pension pots with a value of less than £10,000.
