PTM056550 - Annual allowance: money purchase annual allowance: hybrid arrangements
Sections 227B(5) and 227D Finance Act 2004
There are special rules for the pension input amount for certain hybrid arrangements where the money purchase annual allowance applies. These are to prevent avoidance of the annual allowance charge through manipulation of the pension input amount in a hybrid arrangement.
However these special rules are likely to apply only in a very limited number of cases.
Case 1 will be for any hybrid arrangements where:
- an individual has flexibly accessed a money purchase arrangement
- the individual has a pension input amount to take into account for a hybrid arrangement, and
- the pension input amount for the hybrid arrangement for the tax year concerned has a pension input amount for a possible defined benefits provision and a pension input amount for a possible money purchase provision and both input amounts are the same.
See PTM056560 for more details about Case 1.
Case 2 will be for ‘relevant hybrid arrangements’ where:
- an individual has flexibly accessed a money purchase arrangement
- the hybrid arrangement is set up in respect of that individual on or after 14 October 2014 that could provide either money purchase or defined benefits (or if the arrangement was in existence before 14 October 2014, the arrangement became, whether or not for the first time, a hybrid arrangement providing either money purchase or defined benefits on or after that date),
- the pension input amount for the hybrid arrangement for the tax year concerned would normally be that for the possible defined benefits provision, but
- using the pension input amount for the possible money purchase provision instead for the hybrid arrangement causes an excess over the money purchase annual allowance or otherwise results in an even greater amount to be chargeable to the annual allowance charge by reference to the money purchase annual allowance compared to the amount that would be chargeable by reference to the annual allowance for the tax year concerned.
See PTM056570 for more details about Case 2.