Philip Hammond has used his first Autumn Statement as Chancellor to cut the Money Purchase Annual Allowance (MPAA) from £10,000 to £4,000 from April 2017.
The move will affect people aged 55 and over who have taken funds from their pension savings under the “pension freedoms”, which have been available since April 2015, and reinvested it elsewhere in another pension scheme or investment.
At the moment, people in this position are able to make pension contributions of £10,000 a year. This will now fall to £4,000 a year.
Those who have opted to reduce working hours, rather than retire completely, and so wish to continue contributing to their pensions, are likely to be particularly affected.
People who have never accessed their private pensions remain able to save up to £40,000 a year towards their pensions. The lifetime allowance of £1 million also remains unchanged.
There are a number of options open to you if you have already accessed your pension savings and are affected by the cut to the money purchase annual allowance.
There are also, depending on the policies of your pension provider, options available that will minimise the impact of accessing your pension savings if you need to do so in the future.
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