It looks like over 50s could benefit from a £6,000 pension boost next year, thanks to a new Money Purchase Annual Allowance (MPAA).
The new allowance comes into effect from April 2021 and any eligible over 50s will be able to pay an additional £6,000 into their pension pots each year. This is on top of the standard £40,000 annual allowance and could make a real difference to anyone looking to retire early.
The MPAA is designed to allow people to make additional contributions to their pension pots if they access their pension savings early. This is because people are only able to contribute £4,000 each year to their pension pot once they have already accessed it, and the MPAA will increase this to £6,000.
The additional contribution could make a huge difference to people looking to retire earlier than planned, as it will allow them to top up their pension pots more quickly.
The Government has estimated that around 500,000 people will benefit from the MPAA, and it is hoped that this will help to reduce the number of people who are forced to delay retirement due to inadequate pension savings.
The Government has also said that there will be no change to the maximum amount of money that someone can contribute to their pension pot in a single tax year, which is currently set at £40,000.
For those over 50s looking to retire early, the MPAA could be the difference between a comfortable retirement and a struggling one. It is important that anyone considering taking advantage of the MPAA takes professional financial advice to ensure that they get the best possible outcome.