The government is consulting on reducing the money purchase annual allowance (MPAA) from its current level of £10,000 to £4,000 from April 2017 (2016 Autumn Statement, paragraph 4.20 and HM Treasury: Reducing the money purchase annual allowance: consultation (23 November 2016)).

The MPAA was introduced in April 2015 as part of the pension flexibility reforms and is designed to limit the scope for individuals who are flexibly accessing a defined contribution (DC) pension arrangement to obtain further tax relief by making additional pension contributions. The MPAA is triggered when individuals flexibly access their DC pension savings in certain ways, for example by withdrawing funds under a flexi-access drawdown fund or taking an uncrystallised funds pension lump sum. For a full explanation of how the MPAA works, see Practice note, Annual allowance: overview: Money purchase annual allowance.

HM Treasury notes that the MPAA was set at its current level in order to balance the need to restrict the availability of double tax relief, which according to the consultation paper is "against the spirit of the tax system", with the legitimate desire for individuals who have flexibly accessed DC pension savings to rebuild those savings if their circumstances change.

While the consultation paper suggests that an MPAA of £10,000 was helpful to ensure a smooth introduction of the pension flexibilities, it says the government does not believe an MPAA set at this level is "needed or appropriate on an ongoing basis". Instead, HM Treasury believes an MPAA of £4,000 is "fair and reasonable", but seeks views on whether this is the best level. The consultation also seeks confirmation that a reduction would not adversely affect the auto-enrolment regime or otherwise disadvantage particular groups.

No other changes to the current MPAA regime are proposed. For example, it will still not be possible to carry forward unused MPAA from previous tax years (in contrast to the standard annual allowance).

The consultation period closes on 15 February 2017 and the government will confirm the revised level of the MPAA at the 2017 Budget.

Comment. The proposed reduction is not hugely surprising given the risks arising to the Exchequer from largescale recycling of pension contributions. One point that is not mentioned in the consultation paper is the annual allowance taper that has applied to high-income individuals since 6 April 2016. Questions arise about the interaction of the taper with the MPAA at its new, reduced, level.

At the moment, the maximum reduction in the standard annual allowance for a high-income individual (who earns £210,000 or more) is £30,000. As a result, if such an individual becomes subject to the MPAA, they effectively have zero annual allowance available for further DB savings. If no consequential legislative changes are made, the reduction in the headline level of the MPAA would presumably mean this individual would have a residual annual allowance of £6,000 available for DB savings.

The government plans to consult on several measures concerning the UK tax treatment of non-UK pensions and lump sums. These include:

(2016 Autumn Statement, paragraph 4.21.)

Comment. The impact of these changes will become clearer when more details emerge. Section 615 schemes do not count as registered pension schemes and have been an anomaly in the UK system for some years. Presumably the reference in the Autumn Statement document to closing these schemes to "new saving" means withdrawing their residual tax privileges (or perhaps instituting tax charges) after a specified date to be confirmed.

The proposal to extend the period during which taxing rights apply to lump sums paid to recently-emigrated non-UK residents presumably refers to the so-called "member payment charges" that apply under paragraph 1 of Schedule 34 to the Finance Act 2004. For more details, see Practice note, Pensions issues for internationally mobile employees: Member payment charges.

A consultation paper will be published “shortly” on proposals to address pension scams, including banning so-called “cold calling” in relation to pensions, making it easier to block suspicious transfers and preventing abuse of small self-administered schemes (SSASs) (2016 Autumn Statement, paragraph 3.42).

In line with the government's announcement at the March 2016 Budget, the income tax and National Insurance advantages connected to salary sacrifice arrangements will be removed in most cases from April 2017. However, the government confirmed that, as previously indicated, this change will not affect salary sacrifice arrangements for pension contributions and a small number of other areas (2016 Autumn Statement, paragraph 4.13).

Draft secondary legislation will be published in early 2017 that will introduce reforms to the taxation of dividend distributions to corporate investors to allow exempt investors such as pension funds to obtain credit for tax paid by authorised investment funds (2016 Autumn Statement, paragraph 4.29).

From April 2017, the employer and employee thresholds for National Insurance contributions (NICs) will be aligned at £157 a week (2016 Autumn Statement, paragraph 4.7).

The government has committed itself to continuing the existing “triple lock” policy for uprating the state pension for the duration of the current Parliament, though it notes that spending policy in the next Parliament for this and other protected areas "will need to be determined in light of evolving prospects for the fiscal position". The policy means that the state pension is increased each year by the highest of the rise in average UK earnings, the rise in inflation (measured by the Consumer Prices Index (CPI)) and 2.5%. (2016 Autumn Statement, paragraph 1.57.)