Pension top-up limits put on hold

Government reforms that will limit the ability of many savers to take full advantage of the pensions freedom regime have been shelved because of the general election.

Government reforms that will limit the ability of many savers to take full advantage of the pensions freedom regime have been shelved because of the general election. A cut in the money purchase annual allowance (MPAA), from £10,000 to £4,000, which was first announced last autumn, has not been included in the Finance Bill, the legislation that enacts the government's budget announcements.

The MPAA is the maximum amount that savers may pay into a private-pension scheme each year once they've started drawing on pension benefits, which is allowed from age 55 onwards. While continuing to pay into a private pension, up to the limit, is entirely legal, the government is concerned that some savers are withdrawing funds from their pensions simply so that they can reinvest the money straight away to take advantage of the tax reliefs available on pension contributions, hence the proposed cuts.

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David Prosser
Business Columnist

David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.