|Standard Annual Allowance:||£40,000||£40,000|
|Money Purchase Annual Allowance:||£4,000||£4,000|
|Tapered Annual Allowance:||Tapered annual allowance applies to those with ‘adjusted income’ of more than £240,000 and ‘threshold income’ of more than £200,000.||Tapered annual allowance applies to those with ‘adjusted income’ of more than £240,000 and ‘threshold income’ of more than £200,000|
Standard Annual Allowance
The annual allowance is a limit to the total amount of contributions that can be paid to defined contribution pension schemes and the total amount of benefits that your clients can build up in a defined benefit pension scheme each year, for tax relief purposes.
Money Purchase Annual Allowance
If your clients have flexibly accessed their benefits, the Money Purchase Annual Allowance (MPAA) is the amount that can be paid in one year to their money purchase arrangements without a tax charge applying.
Tapered Annual Allowance
For the taper to apply, the limits on threshold income and adjusted income must both be exceeded. This reduces your clients’ Annual Allowance by £1 for every £2 of adjusted income above £240,000 subject to a maximum reduction of £36,000. The minimum reduced allowance is £4,000. The level of adjusted income at which the maximum reduction in the annual allowance is reached is £312,000.
The Lifetime Allowance is a limit on the amount of pension benefit that can be drawn from pension schemes – whether lump sums or retirement income – and can be paid without triggering an additional tax charge.