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Money Purchase Annual Allowance (MPAA)

Find out how much you can pay into any defined contribution scheme before being taxed

What is the Money Purchase Annual Allowance?

If you’re 55* or over, you can start taking your Investment Builder savings (or any other defined contribution pot you may have) flexibly.

* The government has announced they’ll raise this to age 57 in 2028 for certain members. Depending on where you are in your retirement journey, this could impact how early you can access your USS benefits.

HMRC introduced a limit to stop these savings from being taken out and then repaid into another pension scheme for extra tax relief. This limit is known as the Money Purchase Annual Allowance (MPAA).

Here’s when the MPAA applies

The MPAA will only apply if you choose to access your defined contribution savings in certain ways:

  • Within USS, by taking one or more cash payments (known as UFPLS) from your Investment Builder savings.
  • From an arrangement outside USS, by accessing them flexibly, such as taking an UFPLS or putting your funds into a flexi-access drawdown scheme and starting to take an income.

If you’ve taken savings from a defined contribution arrangement outside of USS, you may have already triggered the MPAA. You should have told us if you've done this so we can check if your USS savings exceed the MPAA.

Once you trigger the MPAA, it’ll apply that tax year – and all future tax years.

How it works

The MPAA limits how much you can pay into a defined contribution arrangement before you need to pay tax. The limit is currently £10,000 per year.

If you and your employer make contributions to a defined contribution arrangement (like the Investment Builder) that go over the limit, you’ll need to pay additional income tax on the amount you’ve gone over by. This cancels out the tax relief which you’d received automatically.

Unlike AA, you can’t carry forward any unused MPAA from previous years.

You’ll have an Annual Allowance too

You’ll still have an Annual Allowance (AA) for any amount you build up in the Retirement Income Builder (or any other defined benefit arrangements) – but this will also include the MPAA limit.

Below are two examples of how your MPAA could impact your AA or Tapered AA.

If you contributed £15,000 into your Investment Builder pot, you’d still have £50,000 of the current £60,000 AA left in the Retirement Income Builder.

That’s because the £5,000 you’re over the MPAA by will be taxed (because you paid £15,000 into a defined contribution arrangement whilst being subject to the £10,000 MPAA) – so won’t count towards your AA.

If you have a Tapered AA of £16,000, your alternative AA for any defined benefit savings would be £6,000, and you’d also have your £10,000 MPAA.

What you need to do if you’re over the MPAA

You’ll need to contact HMRC if you’re over the MPAA.

We’ll let you know if you go over the MPAA in the Investment Builder.

But if you’re paying into a defined contribution arrangement outside of USS, it’s up to you to check whether you’ve gone over the MPAA.

Need a hand?

Sign up for a free Focus on Pension Tax webinar to learn more about pension tax, including USS specific tax mitigation options.

If you want to seek guidance or take financial advice on the options available to you, visit the guidance and financial advice page. You’ll find a range of resources to support your planning and you can also find information on how to access an independent financial adviser.

Got a question?