Money purchase annual allowance: £10,000 once a client has flexibly accessed their pension, against £60,000, worked

A client of 58 has taken a pension income and now asks to pay in more, or has a bonus due that could go into the pension. Before anyone totals the contributions, the file needs to answer one question: has this client flexibly accessed a pension? If so, the limit is no longer £60,000.

What the pages say

Four HMRC and GOV.UK pages, read on 20 October 2026:

• The figure. The Pensions Tax Manual says: "For tax year 2023-24 onwards, the money purchase annual allowance is £10,000." The same page gives the alternative annual allowance as "£30,000 or a lesser amount".
• The standard allowance. GOV.UK says the annual allowance is "£60,000 this tax year", and that it "might be lower if you flexibly access your pension".
• What triggers it. The manual lists eight trigger events. In its words, the first four are payments from newly designated member flexi-access drawdown funds, converting pre-6 April 2015 member drawdown funds into member flexi-access drawdown funds, qualifying for flexible drawdown before 6 April 2015, and uncrystallised funds pension lump sums. The other four are stand-alone lump sums, lifetime annuities that can reduce in amount, scheme pensions from schemes with fewer than 12 pensioners, and payments from overseas pension schemes.
• What does not. The manual lists seven, including payment of a pension commencement lump sum, a trivial commutation lump sum, a "small lump sum", a lifetime annuity that cannot decrease except in prescribed circumstances, and payments from a beneficiary's flexi-access drawdown fund.

The sum

The limit falls by £60,000 - £10,000 = £50,000 a year of headroom. Three clients, all already flexibly accessed:

Check: £5,600 + £3,500 = £9,100; £9,100 + £2,000 = £11,100; £11,100 - £10,000 = £1,100; £25,000 - £10,000 = £15,000; £60,000 - £25,000 = £35,000.

Client A is the one that catches people out. A salary-linked pattern that looks modest uses 91% of the limit (£9,100 / £10,000) before any extra payment, so a bonus or a one-off top-up goes over very easily. If a tax charge applied to the excess at, say, 40%, client B would face £440 and client C £6,000. Those are illustrations only, because I did not read the charging rules.

What the paraplanner can check

• Ask the question at fact-find. Record whether a pension has been flexibly accessed, which pot, which date and what kind of payment. A pension commencement lump sum on its own is on the "does not trigger" list; income from drawdown or an uncrystallised funds pension lump sum is not.
• Add every source. Employer, employee, salary sacrifice and any personal payment all count toward the year's total; list them in one table as above.
• Compare with the right ceiling. For a client who has not accessed flexibly, use the carry forward working and, for high earners, the tapered allowance.
• Look at what was taken. Whether a lump sum was tax-free cash only is part of the answer; see the lump sum allowance sum.
• Put it in the report. The reasoning belongs in the suitability file, and the file checklist is where a reviewer will look for it.

What I did not read

I did not read the tax charge on an excess, how the alternative annual allowance works with defined benefit input, whether carry forward can be used with the £10,000 limit, the rules on telling other schemes or the deadline for doing so (the page I read stated none), or the sections on hybrid arrangements. I did not read any client's pension statements. The headroom figures and the three clients are our arithmetic.

Overlyft builds AI staff who join your advice team and take the contribution check: they read each client's fact-find and pension statements, flag any flexible access, total the year's contributions against the right limit, and hand the adviser a one-page summary to approve before any figure reaches the client.

This is general information, not financial advice. Check the HMRC manual pages and the client's own pension records.