Money purchase annual allowance – last minute change

• United Kingdom

• Pensions

25-04-2017

Money Purchase Annual Allowance – last minute change

Following the decision to call a snap general election in June, the Government has been pushing the Finance (No 2) Bill through Parliament as quickly as it can to ensure that it is in place before Parliament is dissolved next week.

Unexpectedly, the need for speed has meant that some provisions have been dropped from the Bill today (25 April).  One of these is the clause which would have reduced the money purchase annual allowance from £10,000 to £4,000 with effect from 6 April 2017.

The Government has indicated that the provisions dropped from the Bill will be legislated for at the earliest opportunity in the new Parliament so it seems to be the intention that this change will still be made at some point.

So what does this mean in practical terms for schemes?  Legally, the money purchase annual allowance is and remains £10,000.  If the current government is returned to office, it is likely to introduce a new finance bill which picks up the annual allowance reduction.  However, it is not clear whether this change could then be made retrospective to 6 April 2017.  This seems unlikely, but given that the policy intention has already been clearly communicated, it must remain a possibility. 

Trustees or employers communicating with members about this issue may wish to tell them that a change is still on the cards but it is not clear when any such change will come into force.