Fidelity International head of pensions policy Richard Parkin talks about the proposed cut to the Money Purchase Annual Allowance (MPAA) to Julian Marr, editor of Retirement Planner‘s sister title Professional Adviser.
In this short video, Parkin explains the government has always limited the pension tax breaks available to people who have accessed their pension flexibly. The aim of the proposed cut in the MPAA, however, is to stop people “recycling” money from their pension as new pension contributions and effectively generating “free money”.
In addition to running through the government’s proposals, Parkin discusses how effective the measure is likely to prove, whether there are any alternatives and the sort of action advisers should now be commending to their clients.
In last month’s Autumn Statement, Chancellor Philip Hammond announced he wanted to reduce the MPAA from £10,000 to £4,000, from next April, in order “to prevent inappropriate double tax relief”.
The annual allowance limit applies to individuals who have flexibly accessed their pension benefits. The original limit of £10,000 was introduced in April 2015 to stop people claiming further tax relief on any new contributions made to their pots.
Last month, in another video interview with Marr, Parkin considered how advisers can help clients make the best decisions when accessing tax-free cash from their pension.
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