The money purchase annual allowance explained

The trigger is how you take benefits

Taking taxable income from flexi-access drawdown or a qualifying uncrystallised funds pension lump sum normally triggers the MPAA. Simply reaching retirement age does not. The rules can apply even if your income is low enough that no Income Tax is ultimately due on the taxable withdrawal.

Usually, taking only a pension commencement tax-free lump sum and leaving the rest in drawdown does not trigger it. Receiving a defined benefit pension or buying a conventional guaranteed lifetime annuity normally does not either. Genuine small-pot payments have specific exceptions. Ask the provider which legal payment type it intends to use, rather than relying on the amount alone.

Count gross contributions across your pensions

In the first trigger year, the MPAA test covers defined contribution savings from the following day to the tax-year end. In later years it covers the whole year. It is a combined limit across schemes, not £10,000 for each account.

Unused annual allowance from earlier years cannot increase the MPAA. Defined benefit accrual and savings made before the first trigger can require a separate annual allowance calculation. Personal tax relief also has its own earnings and age conditions, so £10,000 is not automatically an amount everyone can personally pay with tax relief.

An example with employer payments

Illustrative, not advice. Someone who triggered the MPAA in an earlier year pays £4,800 into a relief-at-source pension during 2026/27. The provider adds £1,200 basic-rate tax relief, making a £6,000 gross contribution. Their employer contributes another £5,000.

The combined pension input is £11,000, which exceeds the £10,000 MPAA by £1,000. Looking only at the £4,800 that left their bank account would miss the excess. An annual allowance tax charge may arise; it is not a blanket £1,000 penalty. Its calculation depends on the individual's circumstances and any other pension savings.

What to do after a trigger

Your provider should issue a flexible access statement. Tell other active defined contribution schemes within the applicable 91-day deadline and keep the statement. This matters when a workplace scheme is still receiving payroll contributions even though the withdrawal came from an old personal pension.

• Ask payroll for expected employer and employee pension payments, including salary sacrifice and bonuses.
• Add contributions going to personal pensions elsewhere.
• Check the gross figures against HMRC's MPAA guidance.
• If an excess occurs, establish any reporting and tax payment duties rather than assuming the provider will handle everything.