LEBC warns of MPAA 'trap' amid Covid-19 concerns

“Hidden traps” such as the Money Purchase Annual Allowance (MPAA) could await savers looking to access their pensions to bridge a short-term income gap amid the current crisis, LEBC has warned.

The firm highlighted that once the allowance is triggered, the saver loses the right to carry forward any pension savings relief not used in the three earlier years, acting as a "wholly inappropriate" barrier for those looking to rebuild their retirement savings.

Also echoing the warnings of other industry experts, the firm stressed that the allowance, which would restrict future tax relieved pension savings to no more than £4,000 a year, would be a “nasty shock” for savers who looked to rebuild their savings after the crisis.

The firm has now called for the savings limit to be raised back to its originally limit of £10,000, in line with previous suggestions from LCP partner and former pensions minster, Steve Webb.

LEBC director of public policy, Kay Ingram, explained: “This restriction is little understood by the majority of savers and comes as a nasty shock to those who thought they could withdraw funds from their pension for short-term needs and rebuild their savings.

“It is wholly inappropriate for the government to place an obstacle of this nature in the way of prudent savers, needing temporary access to their pension savings."

She continued: “A proportionate response would be to increase the MPAA limit on future pension savings back to £10,000 a year.

“Until that happens, those requiring flexible access to their pension savings should seek advice as it is in many circumstances possible to avoid the impact of this rule.”

    Share Story:

Recent Stories


Making pension engagement enjoyable through technology
Laura Blows speaks to Nick Hall, business development director and Chartered Financial Planner at UK-based Wealth Wizards about the opportunities that technology provides for increasing people’s engagement with pensions and increasing their retirement wealth. Please click here for an edited write-up of the video

ESG & DC – creating the right tools
In the latest of our series of Pensions Age video interviews Francesca Fabrizi, Editor in Chief of Pensions Age is joined by Manuela Sperandeo, Head of Sustainable Indexing EMEA, BlackRock and Mark Guirey, Executive Director, Asset Owner and Consultant Coverage - MSCI to discuss some key trends of ESG investing among UK pension funds today. Please click here for an edited write-up of the video

Savings and finance at retirement
Laura Blows is joined by Claire Felgate, Head of Global Consultant Relations, UK, at BlackRock, to discuss savings and finance at retirement. Please click here for an edited write-up of the video

Global sustainable credit
Laura Blows speaks to Royal London Asset Management senior fund manager, Rachid Semaoune, about global sustainable credit
Global equities and transition investing
Pensions Age editor, Laura Blows speaks to Royal London Asset Management equity investment director, Jonathan Price, about transitioning to sustainable investments within global equities

Advertisement Advertisement