The annual allowance (AA) is the maximum annual value of new pension savings (contributions and benefit accrual) on which an individual can benefit from tax relief.
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If your income (including the value of any pension contributions) is over £150,000, your annual allowance may be reduced. Please refer to the Tapered Annual Allowance factsheet for further details.
Money purchase annual allowance
The money purchase annual allowance (MPAA) is a further restriction on the personal and employer contributions made to money purchase pensions that can benefit from tax relief. The limit for 2015/2016 is £10,000.
It is triggered as soon as you withdraw income from your plan using one of the new withdrawal solutions, such as an uncrystallised fund pension lump sum (UFPLS) or a flexi-access drawdown (FAD).
The lifetime allowance (LTA) sets a ceiling on the total value of pension funds an individual can accumulate with tax relief.
When you take benefits, the value of all the funds you are crystallising will be tested against the LTA.
If your aggregate funds and benefits exceed the LTA, any funds you are crystallising may be liable to the lifetime allowance charge. This is also dependent on any transitional protection you may have.
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