A new Finance Bill was laid before Parliament last week. Its provisions include the reduction of the money purchase annual allowance (“MPAA”) from £10,000 to £4,000, which will have retrospective effect from 6 April 2017.
As explained in our May "In Brief" update, provision to reduce the MPAA was originally included in what became the Finance Act 2017. However, amendments were made to the Act to ensure that it could complete its passage through Parliament before Parliament was dissolved ahead of the June general election, and these amendments included removal of the provision to reduce the MPAA. At the time, the Treasury indicated that the reduction of the MPAA remained Government policy, and that it intended to legislate for its introduction as soon as possible after the election (assuming it remained in power).
Schemes should let members with DC benefits know that the MPAA will be reduced to £4,000 with effect from 6 April 2017. Members with DC benefits may wish to bear this information in mind when deciding whether to flexibly access those benefits for the first time (thereby becoming subject to the MPAA) or, if they are already subject to the MPAA, when deciding the level of their DC contributions in the 2017/18 tax year.