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HMRC internal manual

Pensions Tax Manual

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Annual allowance: money purchase annual allowance: trigger events

Glossary PTM000001
   

Payments from newly designated member flexi-access drawdown funds
Converting pre-6 April 2015 member drawdown pension funds into member flexi-access drawdown funds
Qualifying for flexible drawdown before 6 April 2015
Uncrystallised funds pension lump sums
Stand-alone lump sums
Lifetime annuities that can reduce in amount
Scheme pensions from pension schemes with less than 12 pensioners
Payments from overseas pension schemes

Section 227G Finance Act 2004

The money purchase annual allowance test applies when an individual first flexibly accesses a money purchase arrangement in certain circumstances on or after 6 April 2015.

A ‘trigger event’ determines when the individual first flexibly accesses a money purchase arrangement.

If a trigger event occurs, the money purchase annual allowance test will apply for the tax year in which the event occurs and in subsequent tax years.

The trigger events are set out as follows. The earliest of any of those events is when the individual first flexibly accesses a money purchase arrangement.

Payments from newly designated member flexi-access drawdown funds

If an individual has a member’s flexi-access drawdown fund that came into effect as a result of:

  • funds being designated on or after 6 April 2015 as available to provide drawdown pension, or
  • funds in a pre-6 April 2015 member drawdown pension fund being transferred to another pension scheme and, as part of the transfer, being re-designated as a member flexi-access drawdown fund in the receiving scheme

a trigger event occurs immediately before the first payment is made from that member flexi-access drawdown fund.

For this purpose the first payment means:

  • payment of income withdrawal from the member’s flexi-access drawdown fund, or
  • payment of a short-term annuity purchased with funds from the member’s flexi-access drawdown fund.

Note - a trigger event does not occur if, at the time of a payment from the member’s flexi-access drawdown fund, the whole of the fund is attributable to a disqualifying pension credit (see PTM063230).

PTM062700 has more details about member flexi-access drawdown funds.

PTM062500 has more details about pre-6 April 2006 drawdown funds.

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Converting pre-6 April 2015 member drawdown pension funds into member flexi-access drawdown funds

If an individual has a member’s drawdown pension fund:

  • that came into effect before 6 April 2015, and
  • the individual had not made a valid declaration for flexible drawdown before 6 April 2015, and
  • either:

    • a payment is made from that drawdown fund that causes the fund to convert into a member’s flexi-access drawdown fund automatically because the payment has meant the limit on capped drawdown that would otherwise have applied has been exceeded, or
    • the drawdown pension fund is converted into a member flexi-access drawdown fund as a consequence of a member notification to the scheme administrator to that effect

a trigger event occurs immediately before the first payment is made from the converted member flexi-access drawdown fund.

For this purpose the first payment means:

  • payment of income withdrawal from the converted member’s flexi-access drawdown fund, or
  • payment of a short-term annuity purchased with funds from the converted member’s flexi-access drawdown fund.

Note - a trigger event does not occur if, at the time of a payment from the converted member’s flexi-access drawdown fund, the whole of the fund is attributable to a disqualifying pension credit (see PTM063230). If further funds are designated into the converted member’s flexi-access drawdown fund so that the fund is no longer wholly attributable to a disqualifying pension credit (a ‘mixed fund’) a trigger event occurs immediately before the first payment is made from the mixed fund.

PTM062700 has more details about default conversions of, and member notification to convert, pre-6 April 2015 member drawdown funds into member flexi-access drawdown funds.

 

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Qualifying for flexible drawdown before 6 April 2015

A trigger event occurs at the start of 6 April 2015 for an individual if, before 6 April 2015, a scheme administrator had accepted a valid declaration that the individual met the flexible drawdown conditions.

Note - there is no requirement for any actual payment to be made in such a case.

PTM062600 has more details about flexible drawdown conditions.

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Uncrystallised funds pension lump sums

A trigger event occurs for an individual when an uncrystallised funds pension lump sum is paid to the individual for the first time. The trigger event occurs immediately before that payment.

PTM063300 has more details about uncrystallised funds pension lump sums.

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Stand-alone lump sums

A trigger event occurs for an individual when a stand-alone lump sum is paid to the individual when the individual has primary protection and a protected tax-free lump sum right which is greater than £375,000. The trigger event occurs immediately before that payment.

Note - this does not apply in the case of a stand-alone lump sum paid under a defined benefits arrangement.

PTM063100 has more details about stand-alone lump sums.

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Lifetime annuities that can reduce in amount

If an individual becomes entitled to a lifetime annuity where:

  • the entitlement occurs on or after 6 April 2015, and
  • the terms of the annuity contract allow actual, or possible, decreases in the amount of annuity payable other than in prescribed circumstances

a trigger event occurs immediately before the first payment of the annuity.

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Scheme pensions from pension schemes with less than 12 pensioners

If an individual becomes entitled to a scheme pension under a money purchase arrangement where:

  • the entitlement occurs on or after 6 April 2015,
  • at the time of that entitlement, fewer than 11 other individuals were entitled to the present payment of a scheme pension, or dependants’ scheme pension, under the same pension scheme, and
  • the scheme pension is not payable under an annuity contract which was treated as having become a registered pension scheme (see PTM031300)

a trigger event occurs immediately before the first payment of the scheme pension.

Note - any scheme pensions or dependants’ scheme pensions that in payment for other individuals could be payable under any type of arrangement under the pension scheme.

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Payments from overseas pension schemes

Payment of one of the types of benefits listed above from an overseas pension scheme that has benefitted from tax relief will also be a trigger event.

For example, an individual transfers to a qualifying recognised overseas pension scheme and on or after 6 April 2015 designates funds into what, under a registered pension scheme, would be a member flexi-access drawdown fund, a trigger event occurs immediately before the first payment from that drawdown fund.

PTM110000 has more details about overseas pension schemes.