Money Purchase Annual Allowance triggers are important because accessing a defined contribution pension in the wrong form can permanently restrict the amount of future money purchase pension saving that can receive annual allowance protection. For 2026/27 the MPAA is £10,000, compared with the standard annual allowance of £60,000.
The restriction does not arise merely because someone reaches pension age, transfers a pension or takes every type of lump sum. The precise form in which benefits are accessed determines whether a trigger event occurs.
Which Money Purchase Annual Allowance triggers matter
Taking an uncrystallised funds pension lump sum is a trigger event. So is receiving the first income payment from a newly designated flexi-access drawdown fund. Certain flexible annuities, small scheme pensions and specified overseas pension payments can also trigger the rules.
The full list of Money Purchase Annual Allowance trigger events should be considered before benefits are drawn because the restriction applies from the first relevant trigger event and continues for future tax years.
One important distinction concerns flexi-access drawdown. Merely designating funds to drawdown does not ordinarily trigger the MPAA at that point. The trigger generally arises when the first income withdrawal is made from that fund.
An individual may therefore crystallise part of a pension, take an appropriate pension commencement lump sum and leave the drawdown fund untouched without necessarily triggering the MPAA.
Money Purchase Annual Allowance triggers that do not arise from every lump sum
Several withdrawals are specifically excluded.
A normal pension commencement lump sum does not itself trigger the MPAA. A qualifying small-pot lump sum can also be taken without triggering it, as can certain trivial commutation lump sums. Continuing a pre-6 April 2015 capped drawdown pension within the permitted maximum does not of itself create a trigger event.
The payments that do not trigger the MPAA illustrate why the description “taking money from a pension” is too broad for planning purposes.
The distinction between a small-pot payment and an uncrystallised funds pension lump sum is particularly significant. Both may produce a payment that is partly tax-free and partly taxable, yet a qualifying small-pot payment does not trigger the MPAA whereas an UFPLS does.
The first trigger year has a split calculation
Where flexible access first occurs during a tax year, money purchase pension input occurring after the trigger date is tested against the MPAA.
For example, if flexible access takes place on 1 December 2026, the MPAA test applies to relevant money purchase pension input from 2 December 2026 to 5 April 2027. Pension input before the trigger date forms part of the wider annual allowance calculation.
From the following tax year, the MPAA potentially applies to the whole year’s money purchase pension saving.
If post-trigger money purchase input exceeds the £10,000 MPAA, the calculation also introduces the alternative annual allowance for the individual’s other pension input, broadly including defined benefit accrual and pre-trigger money purchase saving.
Carry forward cannot remove an MPAA excess
This is one of the most important differences from the ordinary annual allowance.
Unused annual allowance from previous tax years cannot be used to increase the £10,000 MPAA. If post-trigger money purchase pension input exceeds £10,000, carry forward does not shelter that excess.
Carry forward may still be relevant to the separate annual allowance or alternative annual allowance calculation, depending on the individual’s wider pension position, but it cannot simply be added to the MPAA itself.
This creates particular risk for employees who take flexible pension income and subsequently re-enter employment with significant workplace pension contributions.
Pension providers issue a flexible access statement
A pension provider must generally issue a flexible access statement after the first trigger event. The individual then has responsibilities to notify other relevant pension schemes within the applicable time limits.
The tax consequence can therefore extend beyond the scheme from which the money was originally taken.
Where an annual allowance charge arises, the relevant amount should be reconciled within the individual’s Self Assessment tax return. Before taking flexible benefits while continuing to work or contribute to pensions, specialist tax advice should consider the form of withdrawal, future contributions and any defined benefit membership together.
Disclaimer: This article is provided for general guidance only and does not constitute personal tax, legal or financial advice. The correct tax treatment depends on the specific facts, applicable legislation and HMRC practice at the relevant time. You should contact us for advice tailored to your circumstances before taking or refraining from any action.
