Money Purchase Annual Allowance (MPAA)
Legally, the Money Purchase Annual Allowance (MPAA) is and always has been £10,000. Following consultation with the industry over the proposed reduction to £4,000, the UK government decided to implement the reduction to £4,000.
On April 6, 2017 it was accepted that the MPAA was to be £4,000. Legally it was still £10,000 because until the Finance Bill 2017 receives Royal Assent, it is not law (originally Royal Assent was expected to be given around August 2017). By gaining Royal Assent it would back date the reduction to 6th April 2017.
Tories U Turn
When the Prime Minister set the date of June 8, 2017 for the general election, the landscape altered. The Conservatives opposed the reduction in the MPAA and removed it from the Finance Bill 2017 so that it could receive Royal Assent prior to the election. This means the MPAA is still £10,000.
The Treasury has stated that if the Conservatives successfully retain government that they will look to implement the reduction of the MPAA to £4,000 as soon as possible. This could mean that they will legislate the change to £4,000 in this tax year. Opinion appears to be divided between those advisors who believe that their clients are able to contribute up to £10,000 versus those who believe that no more than £4,000 can be contributed. There is a real risk of clients facing retrospective tax charges in the future if they do contribute more than £4,000. Although we are not able to give advisors recommendations, it does seem prudent to weigh up the risks versus benefits and to err on the side of caution if in doubt.