The government has clarified its position on a number of outstanding issues for pension savers – but not everyone will be pleased. The Money Purchase Annual Allowance (MPAA) is the most you can save into a defined contribution pension tax-free once you have accessed cash or taken a flexible income from it under pension freedoms rules.
The Money Purchase Annual Allowance (MPAA) is the most you can save into a defined contribution pension tax-free once you have accessed cash or taken a flexible income from it under pension freedoms rules.
The government has now confirmed its intention to reduce the MPAA from £10,000 to £4,000 – but perhaps more controversially, it is intended that the cut will be backdated to April 2017.
The reduction, announced during Autumn Statement 2016 and detailed in the first version of the Finance Bill, was due to come into effect this tax year, but it didn’t receive Royal Assent due to the timing of the general election.
The Treasury has now confirmed that the withdrawn provision will be among several included in a new Finance Bill to be introduced after the summer recess and that the 60% MPAA cut will be applied retrospectively.
Working to 68
In a further measure, the government has confirmed its intention to raise the State Pension age to 68 earlier than the legislated date – and in line with the recommendations of a review by former CBI boss John Cridland.
The State Pension age for men and women will rise through a series of gradual increases to 66 between 2018 and 2020 and to 67 between 2026 and 2028. It was due to start rising to 68 in 2044, but under new proposals,
this will be phased in seven years earlier from 20371.
Around seven million people are affected by this latest proposal, which includes many of those currently in their 40s.
It’s more important than ever to seek advice on these areas to ensure you continue to save in the right way and are on track for a comfortable retirement in line with your expectations!
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested. The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.
Proposed new timetable for State
Pension age increases, www.gov.uk,
19 July 2017