Pensions offer solution to loss of benefits

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PAYING into a pension can help high earners to avoid losing their child benefit, according to Leeds-based wealth management firm Pearson Jones.

Those who pay into a pension can reduce the income they are assessed on for tax purposes, meaning they may be able to keep their child benefit as well as saving for retirement.

The Government’s new High Income Child Benefit Charge, payable on incomes over £50,000 when a person or their partner is receiving child benefit, comes into effect on Monday.

Pearson Jones pension consultant Matt Vosper said: “The tax charge will be tapered so that for every £100 earned above £50,000, a one per cent child benefit tax charge will be imposed. Where one parent has income of more than £60,000, all the child benefit will be lost.”

Mr Vosper said the new income tax charge did not apply to pension contributions or charitable gift aid donations, and could therefore be avoided by starting or increasing contributions to a pension.

“Making such pension contributions, subject to affordability, can be an excellent way of either minimizing, or eliminating, the impact of the High Income Child Benefit Charge,” he added.