Annual allowance · Money purchase AA
Does a UFPLS trigger the MPAA? (and what else does)
Skip to calculators for this topicA UFPLS triggers it; tax-free cash on its own doesn’t. Where flexible access sets the MPAA off, and where benefits leave it untouched.
3 min read · Last reviewed
— In short
Yes — taking an uncrystallised funds pension lump sum triggers the money purchase annual allowance, so from the day after it is paid, money-purchase input above £10,000 a year is brought into an annual allowance charge, and carry-forward cannot lift that limit. Drawing flexi-access drawdown income or a flexible annuity triggers it too. Tax-free cash alone and capped drawdown within the old limits do not. Scheme pensions and lifetime annuities need their specific conditions checked.
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On this page
Yes. Taking an uncrystallised funds pension lump sum (UFPLS) is a trigger event for the money purchase annual allowance (MPAA). From the day after the UFPLS, money-purchase input above £10,000 a year triggers an annual allowance charge — and carry-forward can't lift that ceiling.
What triggers it — and what doesn't
The MPAA targets flexible access: drawing taxable income flexibly from a DC pot, of which a UFPLS is one form (normally 25% tax-free, up to the remaining lump sum allowance, with the rest taxable, in a single lump). Which events set it off and which leave it alone depends on the benefit conditions. These are common cases; PTM056520 also covers protected stand-alone lump sums and overseas payments:
- UFPLS
- Triggers
- Income from a flexi-access drawdown fund
- Triggers
- Post-2015 lifetime annuity allowing decreases outside prescribed circumstances
- Triggers
- Qualifying money-purchase scheme pension with fewer than 12 pensioners
- Triggers — check the conditions below
- Tax-free cash (PCLS) on its own
- Does NOT trigger
- Capped drawdown income within the old limits
- Does NOT trigger
- Small-pots commutation (≤£10,000, where all conditions are met)
- Does NOT trigger
- Defined-benefit scheme pension
- Does NOT trigger
- Lifetime annuity that cannot decrease except in prescribed circumstances
- Does NOT trigger
Take only the tax-free cash and move the rest into drawdown without drawing income, and the MPAA stays untouched. Take a UFPLS, or start drawing income from the drawdown fund, and it bites. A money-purchase scheme pension can also trigger it where entitlement begins on or after 6 April 2015 and fewer than 11 other people receive a scheme or dependants’ scheme pension. The rule excludes collective money-purchase arrangements and the specified annuity-contract exception in PTM056520. A scheme pension is not automatically exempt.
What the trigger costs
Once triggered, post-trigger DC input above £10,000 in a tax year attracts an annual allowance charge — and, unlike the standard allowance, no carry-forward can be set against the MPAA. Say the member triggers the MPAA, then pays £15,000 into a DC pension:
- DC pension input
- £15,000
- Money purchase annual allowance
- £10,000
- Carry-forward available against the MPAA
- £0
- Amount carried to the AA charge
- £5,000
The classic slip is assuming tax-free cash triggers it (it doesn't), or that carry-forward can soak up the excess over £10,000 (it can't — see MPAA and carry forward). Test DC input against the cap, with the default-versus-alternative working shown, on the MPAA calculator, or see the whole position alongside the taper and carry-forward on the pension annual allowance calculator. Signed in, the working prints to a compliance-annex PDF for the file.
PTM056520 / PTM056530 (money purchase annual allowance ; trigger events) · £10,000 from 2023/24 per Finance (No. 2) Act 2023
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Common questions
- Does taking a UFPLS trigger the MPAA?
- Yes. An uncrystallised funds pension lump sum is a flexible-access trigger event (PTM056520). From the day after the UFPLS, defined-contribution input above £10,000 a year attracts an annual allowance charge, and carry-forward can’t be set against that cap.
- Does taking tax-free cash trigger the MPAA?
- No. Taking only the pension commencement lump sum (tax-free cash) and moving the rest into drawdown — without drawing taxable income — does not trigger the MPAA. It’s drawing the taxable income flexibly (or a UFPLS) that sets it off.
- How much is the MPAA?
- £10,000 a year for 2023/24 onwards (it was £4,000 from 2017/18 to 2022/23). It is the limit on money-purchase input, once you have flexibly accessed a DC pot, above which an annual allowance charge arises.
- Does the MPAA stop defined-benefit accrual too?
- No. DB benefits can keep building. If post-trigger DC exceeds the MPAA, other inputs, including DB, enter the alternative test; compare it with the default chargeable amount. If DC stays within the MPAA, test total input against the ordinary allowance with any taper and carry-forward.
Sources
Based on HMRC’s Pensions Tax Manual (PTM056510 general, PTM056520 trigger events, PTM056530 payments that do not trigger) and Finance (No. 2) Act 2023.
- HMRC Pensions Tax Manual, PTM056520 — Annual allowance: money purchase annual allowance: trigger events gov.uk
- HMRC Pensions Tax Manual, PTM056530 — Annual allowance: money purchase annual allowance: payments that do not trigger the money purchase annual allowance gov.uk
- HMRC Pensions Tax Manual, PTM056510 — Annual allowance: money purchase annual allowance: general gov.uk
For planning and illustration purposes only. Verify all inputs against source documents. This explainer does not constitute financial or tax advice.