The Government has moved to resolve the confusion over the amount some people can pay into their pension. Although, not everyone will be happy with the news.
Announced in the Budget earlier this year, the change proposed a cut in the amount some people could pay in to their pension. Known as the Money Purchase Annual Allowance (MPAA), it caps the amount some people, who have already drawn money from their pension under the new Pension Freedom rules, can subsequently contribute. The Government proposed a cut from £10,000 to just £4,000.
However, in the run up to the subsequent General Election, the measure was removed from the Finance Bill to smooth its way through Parliament.
Its exclusion from the Finance Bill caused confusion among people potentially affected by the cut, as well as advisers. For a while both were left in the dark; with the Government stating they intended to implement the change, but not putting forward the legislation to do so.
MPAA confusion cleared
However, the Government has now moved to clear up the confusion. It has confirmed that the cut to the MPAA, from £10,000 to £4,000, will apply to the current, 2017/18 tax-year.
A Government statement read: “The Finance Bill introduced in March 2017 provided for a number of changes to tax legislation that were withdrawn from the Bill after the calling of the General Election.”
“The then Treasury financial secretary confirmed at the point they were withdrawn that there was no policy change and that these provisions would be legislated for at the first opportunity in the new Parliament.”
“The Government confirms that intention. It expects to introduce a Finance Bill as soon as possible after the summer recess containing the withdrawn provisions.”
“Where policies have been announced as applying from the start of the 2017/18 tax year or other point before the introduction of the forthcoming Finance Bill, there is no change of policy and these dates of application will be retained. Those affected by the provisions should continue to assume that they will apply as originally announced”.
The Government has been criticised by pension experts for causing unnecessary confusion and leaving pension savers in limbo.
The news will affect those people who have taken money from their pension under the new Pension Freedom rules; perhaps to partially retire, help out a relative, or simply because capital was needed, but who continue to work and therefore save for retirement.
If you believe you might be affected, or would like to discuss the change, we are here to help. Please call us on the usual number and we will be happy to answer your questions.