What is a money purchase annual allowance?
Answered 17 March 2026
Money Purchase Annual Allowance (MPAA)
What the law says
The Money Purchase Annual Allowance (MPAA) is a reduced annual allowance that applies to an individual's money purchase pension savings once they have flexibly accessed their pension rights. The relevant statutory provisions are sections 227ZA and 227B–227G of the Finance Act 2004.
Under s.227ZA FA 2004, the chargeable amount for annual allowance purposes is the alternative chargeable amount (rather than the default chargeable amount) where:
- the tax year is the year in which the individual first flexibly accesses pension rights (per s.227G), or any later tax year;
- the money-purchase input sub-total (per s.227C) exceeds £10,000; and
- the alternative chargeable amount exceeds the default chargeable amount.
Under s.227B FA 2004, the alternative chargeable amount is the total of:
- the amount (if any) by which the defined-benefit input sub-total exceeds the alternative annual allowance; and
- the amount by which the money-purchase input sub-total exceeds £10,000 (the MPAA).
The alternative annual allowance is calculated as: AA (the individual's annual allowance for the year) minus £10,000 (the MPAA).
The current MPAA of £10,000 was restored for tax year 2023-24 onwards by Finance Act 2023, which amended ss.227ZA(1)(b) and 227B(1)(b) and (2) of FA 2004 (replacing the previous £4,000 figure).
HMRC guidance / practice
What it is: From 6 April 2015, the MPAA rules may apply to an individual who has flexibly accessed benefit under a money purchase arrangement. In any tax year, the MPAA will apply to an individual if: (1) they have flexibly accessed benefits, and (2) their 'money purchase inputs' are more than the MPAA.
Purpose: Once triggered, the individual is subject to a modified annual allowance test with a specific (lower) allowance for money purchase pension savings. If the MPAA is exceeded, the individual also has a reduced 'alternative' annual allowance for any remaining pension savings (e.g. defined benefit accrual). If the MPAA is not exceeded, the individual retains the full standard annual allowance for all their pension savings.
The MPAA applies for the tax year in which the individual first flexibly accessed their benefits and any subsequent tax year where its application produces a greater amount subject to the annual allowance charge compared to the standard annual allowance being applied.
Historical amounts: | Tax Year | MPAA | |---|---| | 2015-16 to 2016-17 | £10,000 | | 2017-18 to 2022-23 | £4,000 | | 2023-24 onwards | £10,000 |
Interaction with the tapered annual allowance: Where both the tapered annual allowance and the MPAA apply, the individual's 'alternative annual allowance' is reduced to: tapered annual allowance minus the MPAA. The chargeable amount is whichever is the greater of: (a) the tapered annual allowance, or (b) the reduced alternative annual allowance plus the MPAA.
Pension input split: When the MPAA applies, an individual's pension inputs must be split into two categories: (1) money purchase pension inputs made after flexibly accessing benefits, and (2) other inputs (essentially defined benefit accrual).
For details on which events trigger flexible access (and therefore the MPAA), HMRC's guidance at PTM056520 should be consulted.
Citation sources
From tax year 2015 to 2016 onwards, individuals who flexibly access a money purchase arrangement will have to test their total pension input amounts against both: the annual allowance (as described in the General section above) the money purchase annual allowance. Such individuals will test their total pension input amount for the tax year against the annual allowance to establish what portion of it (if any) is subject to the annual allowance charge (‘chargeable amount 1’). Also, such individual
Sections 227ZA and 227B to 227G Finance Act 2004 From 6 April 2015 the money purchase annual allowance rules may apply to an individual who has flexibly accessed benefit under a money purchase arrangement. PTM056520 explains which events are classed as flexibly accessing benefits and so trigger the money purchase annual allowance rules to apply to an individual. In any tax year the money purchase annual allowance will apply to an individual if: they have flexibly accessed benefits, and their ‘m
For tax year 2015-16 and onwards, individuals who flexibly access a money purchase arrangement in certain circumstances will trigger the money purchase annual allowance rules for the tax year in which they first flexibly access their benefits and every subsequent tax year. Note – tax year 2015-16 is split into two ‘mini’ tax years for annual allowance and money purchase annual allowance purposes, the pre-alignment tax year and the post-alignment tax year (see PTM058010 for more details). Individ
Part 1 Income tax, corporation tax and capital gains tax Pensions Money purchase annual allowance 21 1 Part 4 of FA 2004 (pension schemes etc) is amended as follows. 2 In the following provisions, for “£4,000” substitute “£10,000” — a section 227ZA(1)(b); b section 227B(1)(b) and (2); c in section 227D(4), Steps 4 and 5. 3 In consequence of the amendments made by this section, in F(No.2)A 2017, omit section 7. 4 The amendments made by this section have effect for the tax year 2023-24 and subsequ
The section The money purchase annual allowance part below explains what the money purchase allowance is and when it applies. When the money purchase annual allowance applies to an individual, their pension inputs also need to be split into two categories: Money purchase pension inputs made after flexibly accessing benefits Other inputs. PTM056500 onwards gives information about certain adjustments that might need to be made to the pension input amounts described above when the money purchase a
Sections 227ZA, 227B to 227G and 228ZA Finance Act 2004 Individuals who have flexibly accessed their benefits may have the money purchase annual allowance rules apply to them. PTM056520 provides guidance on the event that can trigger the money purchase annual allowance rules. If the money purchase annual allowance rules apply the individual may have: a money purchase annual allowance for ‘money-purchase inputs’, and an ‘alternative’ annual allowance for ‘other inputs’. PTM053100 and PTM056510 h