When you take money from your pension—beyond your 25% tax-free lump sum—you trigger the money purchase annual allowance (MPAA).

 

The MPAA sets a limit on how much you and your employer can pay into your pension. This limit is £10,000 a year. It is much lower than the usual £60,000 pension annual allowance. You could have a lower amount if the tapered annual allowance applies.

 

Remember: Taking money out of your pension early reduces how much you and your employer can contribute to your pension later.