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You asked: What is the Money Purchase Annual Allowance (MPAA) and why have I received a letter about this?
The Annual Allowance for pension contributions is set at £40,000. This means that if the total payments made into your pensions in a year exceed this limit, you will be taxed on the excess at your marginal rate. If you've taken a taxable payment from your defined contribution pensions, this will trigger the money purchase annual allowance (MPAA). You will still have an annual allowance of £40,000 in total, but no more than £4,000 can be paid into a defined contribution (money purchase) pension.
If you received a letter about the MPAA you will have either taken a taxable payment from your policy or you are one of a small number of customers where this has been issued in error (if you haven't actually taken a taxable payment, the limit should still be £40,000).
Individuals with income (including the value of any pension contributions) of over £150,000 and who have an income (excluding pension contributions) in excess of £110,000 will be subject to a tapered annual allowance. The rate of reduction in the annual allowance is £1 for every £2 of income over £150,000, up to a maximum reduction of £30,000.
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