In our new weekly series, retirement expert thomasselby answers questions about pensions ⬇️ This week he navigates the complicated world of Money Purchase Annual Allowance...
income from your retirement pot
· Prevents you “carrying forward” unused annual allowances from the three previous tax years in the current tax year.As for the term “flexibly access”, this covers two main types of pension withdrawal: Equally, if you use some or all of your pension to buy an “annuity” – a guaranteed income for life – from an insurance company, this also won’t affect your annual allowance. However, not all annuities are the same and some will trigger the MPAA. The main one to note is an “investment-linked” annuity, where the income you receive is not guaranteed, which will trigger the MPAA.
Furthermore, while “flexibly accessing” taxable income from your pension will usually see your annual allowance reduced by the MPAA, there are “small pots” rules which allow you to make taxable withdrawals while retaining your full annual allowance. One final but very important point – just because you can access your retirement pot at age 55, doesn’t mean you should. In fact, taking too much from your pension, too soon could put your retirement plans in jeopardy.
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