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HMRC lacks data on pension annual allowance breaches
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HMRC clueless about how MPAA might damage retirement plans
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As over half continue to contribute to their pension pots after entering drawdown
More than one-in-10 (14%) of UK working adults aged 55 or over accessed their pensions in 2020, research by Canada Life found.
But two-fifths of the 1,013 surveyed are not aware of the restrictions associated with entering drawdown such as the Money Purchase Annual Allowance (MPAA), which significantly reduces the yearly sum they can contribute to their pots from £40,000 ($55,600, €46,020) to just £4,000.
Only 40% know that there are restrictions in place, but don’t know their extent, as many overestimated the allowance at almost £7,000 a year.
Among those that decided to access their pensions, 42% said it helped top-up their income, a quarter made home improvements, and 17% put the money into other savings vehicles.
MPAA freeze set to squeeze more basic rate tax payers
Even those contributing the minimum to a workplace pension could start to feel the squeeze
The freeze in the money purchase annual allowance (MPAA) is set to “squeeze many more basic rate taxpayers”, according to Just Group.
The firm revealed the MPAA freeze at £4,000, along with changes to tax thresholds, will increase the number of basic rate taxpayers aged 55 and above who have taken a taxable payment from a defined contribution pension - facing a squeeze on tax relief on their future pension contributions.
Just Group added even those contributing the minimum 8% of salary to a workplace pension could start to feel the squeeze due to pension contributions that exceed the allowance.
Pension warning: 1,000 Britons fall into tax trap each day - savers urged to act | Personal Finance | Finance
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