Pension allowances and accessing pensions

Can you access one pension but pay into another without disturbing the allowance?

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Hi all

So if I have a single pension, as soon as I start to draw it I can only put £4,000 a year into that pension.

What if I have two?  Can I still only put £4,000 into that pension, but could put £36,000 (assuming my income is only £50,000 say) into the other?

I have a client who is drawing a pension but paying into another and just want to reassure myself they still get the full £40,000.

Thanks all.

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By David Ex
18th Aug 2021 09:55

Constantly Confused wrote:

I have a client who is drawing a pension but paying into another and just want to reassure myself they still get the full £40,000.

Thanks all.

That’s not right as far as I am aware - unless the first pension is a defined benefit arrangement.

https://www.unbiased.co.uk/life/pensions-retirement/what-is-the-money-pu...

“The MPAA replaces your annual allowance after you’ve started to draw your pension pot(s). Everyone has an annual allowance which restricts how much you can pay into your pension pot each year. But once you’ve started to draw your pension (with a few exceptions), this annual allowance is replaced by the MPAA, which is only 1/10th as big.

The MPAA was originally set at £10,000 but it’s been reduced and is currently £4,000. It was created to stop people from trying to avoid tax on current earnings or gain tax relief twice, by withdrawing pension savings and then paying them straight back in again.”

This is the detail:

“How can you avoid triggering MPAA?

There are plenty of arrangements that don’t trigger MPAA.

You take a tax-free lump sum and buy an annuity that gives you a guaranteed minimum income
You take a tax-free lump sum from your pension pot and set up a drawdown scheme but don’t yet take any income from the drawdown scheme
You cash in pension pots with a value of less than £10,000.
Finally, MPAA only applies to contributions that you make to defined contribution pensions. It doesn’t affect defined benefit pension schemes.”

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Replying to David Ex:
Quack
By Constantly Confused
18th Aug 2021 10:02

David Ex wrote:

“How can you avoid triggering MPAA?

There are plenty of arrangements that don’t trigger MPAA.

You take a tax-free lump sum and buy an annuity that gives you a guaranteed minimum income

Thanks David.

From my own research I have:
"The MPAA won’t normally be triggered if:
you take a tax-free cash lump sum and buy a lifetime annuity that provides a guaranteed income for life that either stays level or increases "

Which I think is the same point as you quoted above, just in different words.

The pension the client is taking is one that has remained constant (small increases) for several years, so potentially the above applies(?).

Despite the fact their pension provider has batted all pension related queries to me, I think I will need to get the client to go back to them and say "does the pension you are paying me trigger the MPAA?", it's the only way to be sure.

Thanks again.

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Replying to Constantly Confused:
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By David Ex
18th Aug 2021 10:28

Constantly Confused wrote:

Despite the fact their pension provider has batted all pension related queries to me, I think I will need to get the client to go back to them and say "does the pension you are paying me trigger the MPAA?", it's the only way to be sure.

Thanks again.

No problem. To be fair to the pension provider, I don’t think it’s advice they could give - it’s effectively tax advice.

An IFA would probably be the best option.

Not sure if this would cover the client’s needs:

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/b...

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By Truthsayer
18th Aug 2021 10:12

If this were possible, everyone would be at it.

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