Pensions  

Suffolk Life warns on MPAA changes

Suffolk Life warns on MPAA changes

Suffolk Life has warned that changes to the money purchase annual allowance (MPAA) will have a disproportionate effect on advisers’ most vulnerable clients.

A HM Treasury consultation is in progress to examine whether the MPAA should be cut from £10,000 to £4,000 from 6 April 2017.

Suffolk Life’s survey, which included responses from around 200 advisers, found they believed the proposed reduction would disproportionately affect those most vulnerable clients, such as those who are self-employed, owners of small businesses, or with unexpected circumstances like redundancy or ill health.

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Greg Kingston, Suffolk Life’s head of product and insight, said the survey results demonstrated a lack of confidence among advisers and their clients in their ability to effectively plan for retirement.

He said: "From our survey responses, it appears that the people who would be most greatly affected by this change are individuals who have been most sensible with their saving plans.

"These are individuals who may be affected by sudden unfortunate events – but still see the importance in making retirement provisions for later life, rather than simply relying on the state pension."

Nearly all advisers surveyed said they do not believe their clients over age 55 are using the pension freedoms to abuse contribution tax relief and recycling pension money.

The majority of advisers who responded to the survey said that while they do have clients who have triggered the MPAA, most of those clients still intend to contribute in the future.

Three-quarters of respondents said reducing the MPAA “contradicts the spirit of pension freedoms”, which were designed to support flexibility in retirement.

Suffolk Life's survey was carried out this month among 196 advisers.

julia.faurschou@ft.com