Money Purchase Annual Allowance (MPAA): A 2026/27 Guide

The money purchase annual allowance, or MPAA, is a reduced £10,000 annual pension allowance that applies once you have flexibly accessed a defined contribution pension. It limits how much can be paid into defined contribution pensions - your own contributions, employer contributions, and any third-party contributions combined - in any tax year while still receiving tax relief. In practice, it replaces the standard £60,000 allowance with £10,000 for your DC savings.

Once triggered, the MPAA is permanent: there is no mechanism to undo it, and it applies for every subsequent tax year. The £10,000 cap only actually restricts you in years when you contribute above that level, though - if you stop DC contributions it has no practical effect, and it would simply re-apply the moment you resumed. For 2026/27, the MPAA limit is £10,000.

For the senior professionals NOVA works with - particularly those in their late 50s and early 60s considering a partial pension drawdown, business owners after a small DC withdrawal, or anyone consolidating pensions from former employers - the MPAA is a rule that commonly gets triggered by accident. This guide explains what it is, exactly what triggers it, what happens once triggered, and the planning scenarios where it matters most.

What is the money purchase annual allowance?

"Money purchase" is just another name for a defined contribution pension, hence the name of the allowance. The MPAA applies only to those DC pensions: your own contributions, employer contributions, and any third-party contributions, combined across all your DC schemes. It does not limit contributions to defined benefit pensions, which continue to be measured against a separate alternative annual allowance (covered below).

The MPAA was introduced by the Taxation of Pensions Act 2014, alongside the broader pension freedoms reforms. From 2017/18 to 2022/23 the limit was £4,000; it was raised to £10,000 from 6 April 2023 and has remained at £10,000 through 2026/27. The mechanic is set out in HMRC's Pensions Tax Manual at PTM056100.

What triggers the MPAA (and what doesn't)

The MPAA is triggered only by specific actions, and many ways of accessing a pension don't trigger it - a distinction that catches readers out in both directions.

Triggers the MPAA:

• Taking taxable income from a flexi-access drawdown arrangement

• Taking an uncrystallised funds pension lump sum (UFPLS) - typically a lump sum combining tax-free cash and taxable income in one payment

• Taking income from a pre-2015 capped drawdown plan that exceeds the maximum limit set by the Government Actuary's Department (GAD)

• Receiving a stand-alone lump sum where you have primary protection with protected lump sum rights

Does not trigger the MPAA:

• Taking the 25% tax-free cash (pension commencement lump sum) on its own, leaving the rest of the pot invested

• Purchasing a lifetime annuity with all or part of your pension

• Drawing income from a defined benefit (final salary or career average) pension

• Taking a "small pots" lump sum (up to three lump sums of £10,000 or less from separate pension schemes over a lifetime)

• Taking a trivial commutation lump sum (where total pension benefits across all schemes are below £30,000)

• A serious ill-health lump sum

• Death benefits paid to beneficiaries

If you trigger the MPAA, your pension provider is required by law to notify you in writing within 31 days. The detail is set out in HMRC's Pensions Tax Manual at PTM056110 (trigger events).

What happens once the MPAA is triggered

Once triggered, the MPAA applies for the rest of that tax year and every tax year afterwards. There is no mechanism to return to the standard £60,000 allowance, even if you stop taking income from the pension that triggered it.

The £10,000 limit covers contributions to all your defined contribution pensions combined: personal contributions (including the basic-rate tax relief HMRC adds automatically), employer contributions, and salary sacrifice arrangements. Exceeding it attracts an annual allowance tax charge at your marginal income tax rate on the excess, settled through Self Assessment.

Two further points are commonly missed:

• Carry forward does not extend the MPAA. Unused MPAA allowance from previous tax years cannot be brought forward to make DC contributions above £10,000 in a later year. The carry forward rules covered in the Carry Forward Pension Allowance article apply only to the standard annual allowance, not to the MPAA.

• The MPAA cannot be reversed. This is the rule we most often see clients wish they'd known about before triggering it. Once you have flexibly accessed a DC pension in a way that triggers the MPAA, the £10,000 limit applies permanently - regardless of any later change to your employment, income, or pension intentions.

How the MPAA interacts with the standard annual allowance

For someone with only defined contribution pensions, the MPAA simply replaces the standard £60,000 annual allowance with £10,000. There is no separate "alternative" calculation to worry about.

For someone with both defined contribution and defined benefit pensions, the rules are more involved. DC contributions remain capped at £10,000 (the MPAA), but DB pension input continues to be measured against an alternative annual allowance of £50,000 - calculated as £60,000 minus the £10,000 MPAA. So the total available across both DB and DC is the same £60,000 as the standard annual allowance, but the DC portion is hard-capped at £10,000.

For high earners affected by the tapered annual allowance as well as the MPAA, the lower of the MPAA £10,000 or the tapered allowance applies to DC contributions, and the alternative annual allowance for DB pension input is reduced correspondingly. This combination is the worst-case planning scenario - typically a senior partner or MD who took a small DC drawdown years before realising they would also become subject to the taper.

When the MPAA matters most for planning

For senior professionals who haven't yet accessed any defined contribution pension, the MPAA is most useful as a constraint to be aware of, not a problem to manage. Three scenarios where it materially matters:

• Bridging into retirement. Someone in their late 50s or early 60s taking partial flexi-access drawdown from a workplace pension to bridge income before state pension age, while still planning substantial contributions to a SIPP. The small drawdown triggers the MPAA permanently and caps future SIPP contributions at £10,000.

• Pre-business-sale drawdowns. A business owner who took a modest DC drawdown during a low-income year, intending to make a large pension contribution from the sale proceeds. The earlier drawdown caps the sale-year contribution at £10,000 - often £40,000–£50,000 below what would otherwise have been possible.

• Workplace pension consolidation. A senior professional consolidating a DC pension from a former employer who took a taxable withdrawal during the transition. The consolidation transfer itself doesn't trigger the MPAA, but any taxable income drawn during the process can.

A common MPAA conversation we have at NOVA is with clients who triggered it years before realising what it meant, often after a small drawdown they'd forgotten about. Once triggered, and depending on their circumstances, individuals may wish to consider DB pension input, ISA contributions, and other savings and retirement planning options.

How NOVA can help

The MPAA scenarios that can benefit from advice are the ones that happen before a planned pension withdrawal; for example - checking whether the proposed action triggers the MPAA, whether the timing should be reconsidered, and whether other options (a lifetime annuity, defined benefit drawdown, or simply waiting) could meet the same income need without permanently capping future contributions.

If you'd like to speak to a NOVA adviser about MPAA, we offer a free 20-minute introductory call. There's no obligation and no charge.

How this article was prepared

This article was written by Ella Killen, Financial Adviser and Partner at NOVA Wealth. It cites HMRC's Pensions Tax Manual and GOV.UK guidance directly, with primary sources. The figures and rules stated reflect the position for the 2026/27 UK tax year.

Capital at risk. Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change. We do not provide tax advice. This article does not constitute personal advice. All figures quoted are for illustration purposes only. Before accessing your pension it is important to consider all of your options, therefore, you should seek professional financial advice or visit Pensionwise.gov.uk.

Issued on behalf of Nova. Nova is a trading name of Nova Wealth Ltd, which is authorised and regulated by the Financial Conduct Authority (FRN: 778951) and is a limited company registered in England & Wales (10739796).

Sources:

• HMRC Pensions Tax Manual PTM056100 - Money Purchase Annual Allowance

• HMRC Pensions Tax Manual PTM056110 - MPAA trigger events

• GOV.UK - Tax on your private pension contributions

• Taxation of Pensions Act 2014

About the author

Ella Killen, Financial Adviser. Ella is a Partner at NOVA Wealth, based in London. She works primarily with senior professionals and partners in professional services on retirement and pension planning, complex contribution and allowance planning, investment strategy, and personal tax planning - helping high earners whose pension allowances are restricted understand what they can still pay in, and when. Connect with Ella on LinkedIn.