The Money Purchase Annual Allowance (MPAA) is a reduced limit on how much you can contribute to defined contribution pensions (including SIPPs) once you have flexibly accessed your pension. It is an important rule for anyone who has started drawing taxable income from their pension and still wants to continue contributing toward their retirement.
This article explains what the MPAA is, when it is triggered, how it affects your pension contributions, and why it matters.
What Is the MPAA?
The MPAA sets the maximum amount you can contribute to defined contribution pensions each tax year, once certain pension withdrawals have been made, without facing a tax charge.
For the 2025/26 tax year, the MPAA is £10,000.
This is significantly lower than the standard annual allowance, which is £60,000.
When Is the MPAA Triggered?
The MPAA is triggered when you flexibly access your pension. This usually means taking income beyond your 25% tax‑free lump sum.
Examples that trigger the MPAA include:
- Taking flexible drawdown income from your SIPP.
- Taking uncrystallised funds pension lump sums (UFPLS), which are part tax-free, part taxable.
- Certain types of annuity purchases, particularly flexible annuities.
Does not trigger the MPAA:
- Taking only your 25% tax-free lump sum without income.
- Buying a lifetime annuity that provides a guaranteed income.
- Receiving a small pots lump sum under £10,000 (up to three times).
- (These non-triggering events are general guidance not directly cited in the search results, so included here only for clarity without specific source claims.)
How Does the MPAA Work?
Once triggered, the MPAA:
- Replaces your standard annual allowance for defined contribution contributions.
- Reduces your total allowance from £60,000 to £10,000 per year.
- Applies to all contributions made by you, your employer, or anyone else into your defined contribution pensions.
If you exceed the MPAA, you may have to pay an annual allowance tax charge on the excess.
Why Was the MPAA Introduced?
The MPAA was introduced to prevent individuals from:
- Withdrawing pension savings tax‑efficiently, then
- Recycling that money back into pensions to claim additional tax relief.
It ensures that pension tax relief is used for genuine retirement saving, not as a tax advantage after income has been withdrawn.
Who Should Pay Special Attention to the MPAA?
The MPAA is especially important for:
- Those still working after accessing their pension
Many people take some pension income while continuing to work. If you want to keep contributing significantly to your pension, triggering the MPAA could severely limit what you can put in.
- People planning to rebuild pension savings
If you expect to make large contributions in the future, triggering the MPAA early can significantly restrict your options.
- Self‑employed individuals
Irregular income may mean years where large pension contributions are desirable; triggering the MPAA limits flexibility.
Can You Use Carry Forward With the MPAA?
No.
Once the MPAA applies, you cannot use carry forward to contribute more than £10,000 to defined contribution pensions.
This means unused allowances from previous tax years cannot increase the MPAA limit.
How to Avoid Triggering the MPAA
If you want to maintain the full £60,000 allowance, avoid:
- Taking flexible withdrawals.
- Using UFPLS for income.
- Starting flexi-access drawdown with taxable income.
If you need some pension benefits but want to avoid triggering MPAA then you should discuss this with a qualified and regulated financial adviser.
Summary
The Money Purchase Annual Allowance is a key pension rule that reduces your annual contribution limit to £10,000 if you have flexibly accessed your pension.
This lower allowance can significantly affect your long-term retirement planning, particularly if you continue working or intend to make large pension contributions in the future.
Understanding when the MPAA is triggered and how it limits your ability to contribute can help you make informed decisions about accessing your pension.
