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Advisers split on MPAA contributions as uncertainty continues

17 per cent of advisers would allow affected clients to contribute more than £4,000 as cut date remains unclear

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Advisers are responding cautiously to uncertainty around the money purchase annual allowance, with just 17 per cent indicating they will allow clients to contribute more than £4,000 by making the assumption the MPAA is still £10,000.

The Government announced a cut to the MPAA – from £10,000 to £4,000 – in the 2016 Autumn Statement. It was supposed to be introduced on 6 April this year.

However, the MPAA reduction was one of several measures removed from the Finance Bill due to time pressures stemming from the snap general election that will be held on 8 June.

Sipp provider Suffolk Life says the Government has indicated it has not changed its mind about the reduction, but is unclear when the change would take effect if it is written into legislation at a later date.

The MPAA was introduced in 2015 and aims to discourage people from using pension freedoms to avoid tax, and potentially national insurance contributions, by introducing a lower alternative annual allowance where savers have accessed their defined contribution pension.

A Suffolk Life survey of 151 advisers shows 39 per cent will advise their clients to contribute no more than £4,000, while 44 per cent will only allow their clients to contribute more than £4,000 on the understanding that they may face a retrospective tax charge in the future.

Just 17 per cent of advisers say that they would be willing to allow their clients to contribute more than £4,000 by making the assumption that the MPAA is now £10,000.

Suffolk Life pension technical manager Jessica List says: “The survey results showed a cautious, mixed reaction from advisers, indicating that there’s no clear view of what the Government might do next, following last week’s announcement.”

“Advisers have been left in an incredibly difficult position: they don’t want their clients to miss out on a potential window of opportunity but understandably the majority don’t want to risk advising them to do something which could later incur a tax charge.”

The Suffolk Life survey results echo a snap poll on the Money Marketing website, in which 40 per cent of respondents said they would not review pension contributions in light of the MPAA cut delay, 33 per cent said they would review clients’ contributions, and 27 per cent remained undecided.



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