I am not a financial advisor and nothing in this post constitutes financial advice. All investments carry risk and the value of your investments can go down as well as up. Please do your own research and consider seeking independent financial advice before making any investment decisions.
Last reviewed: 24 October 2026
I’m 52 and I still pay into my SIPP every month, which is exactly why the money purchase annual allowance feels personal to me. It’s one of the quieter reasons I won’t touch my pension early, and when I worked out how much you could lose by taking your pension at 55, it was cost number three of five.
It’s also the rule I worry about most for women in my position. I took a four year career break at 36, then worked part time for three years. If those lean years had landed in my late fifties, with a pension I could reach, taking a little out to tide me over would have looked sensible. Then I’d have gone back to work, keen to catch up, and found I could only pay in a fraction of what I’d planned, for good.
Table of Contents
The short answer
The money purchase annual allowance (MPAA) is a lower limit on what can go into your defined contribution pensions each year before a tax charge applies. It starts the first time you take taxable money flexibly, drops your limit from £60,000 to £10,000 a year, and applies to every tax year after that. Taking only your tax free cash doesn’t trigger it.
What is the money purchase annual allowance?
Each year there’s a cap on how much can go into your pensions with tax relief. That’s the annual allowance, £60,000 for the current tax year, with tax relief on your own contributions limited to 100% of your earnings, and it’s why paying in can be so powerful when you’re catching up. I’ve set out the relief maths in whether pensions are worth it.
The MPAA replaces that £60,000 with £10,000 a year for your “money purchase” pensions, once you’ve started taking taxable money out flexibly. Money purchase is HMRC’s term for a defined contribution pension, where you build up a pot of investments, such as a SIPP or most workplace pensions.
It exists because, when pension freedoms arrived in April 2015, the government wanted to stop people taking money out and paying it straight back in for a second round of tax relief.
Two details catch people out.
It counts your employer’s money too. The limit covers everything paid into your defined contribution pensions, including your employer’s contributions. Go back to work and get auto enrolled, and every pound your employer adds eats into that £10,000.
Older advice may quote the wrong figure. HMRC’s manual shows the MPAA was £4,000 from 2017/18 to 2022/23, and went back up to £10,000 from 2023/24. Anyone quoting £4,000 is working from the old rules.
What triggers the MPAA, and what doesn’t
In short, under the money purchase annual allowance rules, taking taxable money flexibly from a defined contribution pension triggers the MPAA, while taking only your tax free cash doesn’t. These are the MPAA pension rules in one table.
| Triggers the MPAA | Doesn’t trigger the MPAA |
| Your first income payment from flexi access drawdown | Taking only your tax free cash |
| An uncrystallised funds pension lump sum (UFPLS) | A lifetime annuity whose payments can’t go down |
| A flexible lifetime annuity, where payments can go down | Small pot lump sums |
| A scheme pension from a money purchase scheme paying fewer than 12 pensioners | Trivial commutation lump sums, another rule for small pensions |
| A scheme pension where at least 11 other people are being paid | |
| Capped drawdown set up before April 2015, if you stay within the cap |
The left column comes from HMRC’s list of trigger events and the right from its list of payments that don’t trigger it. Taking a final salary pension isn’t a trigger either, because every trigger involves a defined contribution pot.
Flexi access drawdown means your pot stays invested and you take income as and when you choose. An UFPLS is a chunk taken straight from your pot, a quarter tax free and the rest taxed as income.
The drawdown row is subtler than it looks. Moving into drawdown and taking your tax free cash doesn’t trigger anything. HMRC says the trigger happens immediately before your first income payment, so it’s that first taxable payment, however small, that starts the clock.
Money purchase annual allowance examples
These are illustrations using 2026/27 rates, correct at the time of writing, with made up names.
Example 1: Sue draws a little income, then goes back to work.
Sue is 56. Short of money between jobs, she takes £5,000 of taxable income from her pension through drawdown in October, which triggers the MPAA. She then starts a new job, and between her contributions and her employer’s, £14,000 a year goes into her workplace pension.
- The year she takes the money. Only contributions made after the day she first accessed her pension count towards the £10,000. About £7,000 goes in between October and 5 April, so she’s under the limit.
- Every full year after that. £14,000 against a £10,000 limit leaves her £4,000 over.
- The tax charge. The £4,000 is taxed at her marginal rate, which is £800 a year as a basic rate taxpayer, or £1,600 as a higher rate taxpayer.
That one £5,000 withdrawal could cost her £800 or more for every year she keeps paying in at that level.
Example 2: Jo takes only her tax free cash.
Jo is also 56, with a £40,000 pot. She takes £10,000 tax free (her 25%) and leaves £30,000 invested in drawdown, untouched. She goes back to work too, and £14,000 a year goes in.
Jo hasn’t triggered the MPAA, so she keeps the full £60,000 allowance and owes nothing. The moment she takes her first income payment from that £30,000, though, she’s in Sue’s position.
Example 3: The same £8,000, taken two ways.
This comes from HMRC’s own example, and it’s the one I’d most want you to remember. Someone wants all of an £8,000 personal pension as a lump sum.
- As a small pot lump sum: £2,000 tax free, £6,000 taxed as income, and the MPAA isn’t triggered.
- As an UFPLS: £2,000 tax free, £6,000 taxed as income, and the MPAA is triggered.
The money and the tax are identical. Only the label on the payment differs, and one label keeps your £60,000 allowance while the other cuts it to £10,000 for life. If you have a small pot, ask your provider which route they’d use before you sign anything.
What happens if you exceed the money purchase annual allowance?
You’ll pay the annual allowance charge on the excess, which is taxed at your highest marginal rate, cancelling out the relief you got on it. You report it in the “Pension savings tax charges” section of a Self Assessment tax return, even if someone else pays it.
Scheme Pays probably won’t help. Your scheme only has to pay the charge from your pot if both of these are true: your savings in that scheme are over £60,000 for the year, and the charge is more than £2,000. A typical MPAA breach meets neither. Sue’s scheme can choose to pay her £800 or £1,600, but it doesn’t have to, so most people in her shoes pay it themselves.
Carry forward is off the table. Normally you can use unused allowance from the previous three tax years. Once the MPAA applies, gov.uk says you can’t use unused allowances from previous years to cover going over it, and HMRC’s manual adds that unused MPAA can’t be carried forward either.
Do you have to tell your other pension providers?
Yes, and almost nobody mentions it.
When you first take money flexibly, your provider has to send you a flexible access statement within 31 days. Keep it safe.
You then have 91 days from receiving it to tell every other scheme you’re still paying into, according to HMRC’s Pensions Tax Manual. You don’t need to tell the scheme that sent it, and if you join a new workplace pension later, you have 91 days from joining. A copy of the statement does the job.
If you don’t, HMRC can charge a penalty of up to £300. How often that happens is unclear, and Tax Adviser magazine notes that HMRC’s own manual doesn’t mention this penalty for members.
So could you just not tell them?
If that thought has crossed your mind, you’re not alone, because it crossed mine. HMRC is stretched, nobody seems sure that £300 is ever charged, and your other providers have no way of finding out on their own. There’s no central register linking your pensions, so the only scheme that knows you’ve taken money is the one that paid you. Keep quiet, the thinking goes, and you can carry on paying in up to £60,000 a year, which could be worth far more than a £300 fine.
The catch is in that last part. Staying quiet doesn’t keep your £60,000 allowance. The £10,000 limit starts the moment you first take taxable money flexibly, whether anyone else knows or not, and telling your schemes is only the paperwork that goes with it.
What staying quiet does change is who spots the problem. A scheme only has to send you a pension savings statement, the letter that tells you you’ve gone over £10,000 with them, if it believes you’ve flexibly accessed a pension. If you haven’t told it, that letter never comes. You’re still the one who has to declare the excess on your Self Assessment return, just without anything to remind you.
So the real risk was never the £300. Go back to Sue. If she said nothing and kept paying in £14,000 a year for three years, she’d still owe £800 a year in annual allowance charges, £2,400 in all, plus interest from when each one was due. If HMRC caught up with her, the penalty for an inaccurate tax return can reach 30% of the tax owed if it’s treated as careless and 70% if it’s treated as deliberate, or 100% if you’d tried to hide it. At 70%, that’s another £1,680 on top. I’m not a tax expert, but choosing not to tell your schemes wouldn’t make “I didn’t realise” an easy case to argue.
That’s why I’d tell every scheme. The £300 is the smallest risk here, and that one letter is what stops a slip in one year quietly turning into several years of tax bills.
SIPP money purchase annual allowance
A SIPP is a defined contribution pension, so the MPAA applies to it in full. If you’d like a refresher, I’ve covered what a SIPP is in plain English.
The limit is shared across all your defined contribution pensions. Take a small UFPLS from an old workplace pot, and your SIPP and your current workplace pension drop to the same £10,000 between them. It works the other way round too.
How to avoid triggering the MPAA
These are the steps I’d look at, in order, if I needed money and wanted to keep my full allowance.
- Take only your tax free cash first. As Jo shows, you can take your 25% and leave the rest invested without triggering anything, provided you take no income from it.
- Bridge the gap with ISAs or other savings. ISA money can come out at any time without touching your pension allowances. You can put up to £20,000 a year into ISAs, correct at the time of writing, and I’ve explained how the two fit together in SIPP vs ISA.
- Use the small pots rules where you’re eligible. Pots worth up to £10,000 can be taken as small lump sums, up to three from personal pensions, without triggering the MPAA. You need to be 55, or 57 from 6 April 2028 (see can I take my pension at 55), unless you have a protected pension age.
- Get free Pension Wise guidance before you decide. Pension Wise offers free, government backed guidance if you’re 50 or over with a defined contribution pension.
As for me, my SIPP stays locked, and I’m glad of it. I’ve raided every account I could reach in the past, including dipping into my stocks and shares ISA too early, so a pension I can’t touch until 57 is a kindness to my future self. After my career break and the part time years, my fifties are my catching up years, and I want the full £60,000 door open while I’m earning, not a £10,000 one I closed by accident.
FAQ
Does taking my tax free lump sum trigger the MPAA?
No. Taking only your tax free cash, usually up to 25% of your pot, doesn’t trigger the MPAA, so you keep the full £60,000 allowance. The trigger is taking taxable money flexibly, such as your first drawdown income payment or an UFPLS. Move into drawdown, take the tax free cash and leave the rest untouched, and nothing changes.
Can the MPAA be reversed?
No. Once triggered, the MPAA applies for that tax year and every tax year after it, and there’s no way to undo it, even if you stop taking income. That permanence is why it’s worth checking how any payment will be treated before you take it. Small pot lump sums and taking only your tax free cash are the main ways to reach money without starting it.
Does the MPAA apply to my workplace pension and employer contributions?
If your workplace pension is a defined contribution scheme, yes. The £10,000 limit covers everything paid into all your defined contribution pensions, including your employer’s contributions, so a generous employer can push you over without you paying in much yourself. It doesn’t matter which pension you took money from, because triggering it in one applies the limit across all of them.
Does it affect a final salary pension?
Taking a final salary (defined benefit) pension isn’t a trigger, because the MPAA is only set off by taking money flexibly from a defined contribution pot. If you’ve triggered it elsewhere and are still building up a final salary pension, that growth is tested separately, not against the £10,000. If you have both kinds, ask your scheme or Pension Wise how the rules apply to you.
What is the MPAA for 2026/27?
It’s £10,000 for the 2026/27 tax year, under current rules. It has been £10,000 since 2023/24, and was £4,000 from 2017/18 to 2022/23, so older articles may quote the lower figure. Allowances can change at any Budget, so check gov.uk for the tax year you’re actually in before relying on any figure, including mine.
Can I use carry forward with the MPAA?
No. Carry forward normally lets you use unused annual allowance from the previous three tax years, but you can’t use it to cover going over the MPAA, and unused MPAA can’t be carried forward to later years either. If you’re expecting a bonus or an inheritance you’d like to pay into your pension, that’s a strong reason to think before triggering it.
The MPAA is easy to set off and impossible to undo, but it’s also easy to avoid once you know where the line is. A quick question to your provider before you take a penny could protect your allowance for years.