5. Standalone lump sum
A standalone lump sum that is paid out after 5 April 2015 will trigger the MPAA where the reason the whole pension was paid as a lump sum was the member had primary protection and lump sum rights at A-day in excess of £375,000.
6. Flexible annuity
Many annuities are “flexible” but for MPAA purposes it is a very specific type of annuity. It is an annuity where entitlement occurred after 5 April 2015 and it varies in a way not permitted before that date. Allowable variations are in the Registered Pension Schemes (Prescribed Manner of Determining Annuities) Regulations.
7. Scheme pension (less than 12 members)
Where a client is entitled to scheme pension from a money purchase arrangement after 6 April 2015 this will trigger the MPAA unless there are 12 or more members entitled to scheme pensions .
Can you access pensions and not trigger the MPAA?
Yes.
Pension commencement lump sum (PCLS) only
Where you vest enough pension to take a lump sum to meet your needs and do not take any income.
Capped drawdown income within the cap
You can change the income amount within the cap at any time for example starting, reducing or increasing.
Defined benefits
Benefits such as PCLS and pension or trivial commutation lump sums do not trigger.
PCLS and scheme pension from a DC occupational scheme
Providing there are at least 12 members receiving a scheme pension there will be no trigger. Therefore scheme pensions from small self-administered schemes will be a trigger.
Small pots
A small pot payment made under The Registered Pension Schemes (Authorised Payments) Regulations is not a trigger.
Dependants’ benefits
Taking dependants’ benefits is not a trigger. This includes death benefits for non-dependants too for example, lump sums or nominees drawdown.
Standalone lump sums
These are allowed for any amount as long as they do not fit the trigger criteria above.
Lifetime annuity
An annuity that is only allowed to vary in such a way that was permitted prior to 6 April 2015 is not a trigger.
Disqualifying pension credits
Income taken from assets wholly attributable to a disqualifying pension credit, that is, pension credits from divorce pension sharing orders where the benefits were already in payment at the time of the order, is not a trigger.
So who will be impacted and what can you do?
There are two cohorts:
1. Those yet to take benefits
It will become an issue when they want to take flexible benefits but foresee continued DC savings over £4,000. They will need to accept the tax charge, reduce future savings plans or make alternative savings arrangements.
Planning may require the transfer of pension benefits to a scheme that will allow benefits to be taken in a way that does not trigger the MPAA. Individual circumstances will dictate if benefits can be taken in a way that does not trigger. Alternatively, perhaps non-pension savings could be used to meet their needs.
