Pension contributions could help to ‘regain’ child benefit payments | Personal Finance | Finance
Britons who earn over a certain amount could begin losing their child benefit entitlement, with some being stripped of it entirely. Heather Owen, financial planning expert at Quilter, urged people to consider paying into their pension as a means of accessing various financial benefits.
Regain child benefit
Ms Owen explained how Britons may be able to avoid losing some of their child benefit by making pension contributions.
She said: “If either you or your partner’s income is over £50,000, you will have lost some or all of your child benefit.
“However, by keeping your taxable income below that threshold you may be able to regain some of your allowance.
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Tax-free childcare scheme
Additionally, eligible Britons may be able to make use of the tax-free childcare scheme to help with childcare costs.
Claimants could benefit from up to £500 every three months, or up to £2,000 a year, for each of their children.
For every £8 someone pays their childcare provider, the Government will pay £2 towards the costs.
Tax relief on pension contributions
Ms Owen urged Britons to consider making pension contributions ahead of the deadline, which could benefit from tax relief.
She said: “Saving into your pension pot is one of the best ways to save for retirement, particularly as you receive income tax relief on the money you put in.
“Most people can save up to £40,000 this tax year, or 100 percent of your salary – whichever is lower.
“If you are a higher earner with an income of over £200,000 a year, your annual pension allowance will gradually reduce down to be as low as £4,000 in the current tax year.”
This is known as the tapered annual allowance.
There is also a lifetime allowance for pensions, which is set at £1,073,100. However, people’s funds are not usually assessed for this until they eventually draw their pension, reach age 75, or on death.
Ms Owen explained that even if someone doesn’t manage to make the most of their annual allowance in a given year, they do not necessarily lose it.
She said: “While there is still time to top up your pension pot if you are able, if you do not use all of your personal allowance this year then you may be able to ‘carry it forward’ for up to three years.
“As pension planning can be a complex area, it can be greatly beneficial to speak to a financial adviser who will be able to support you in making the most out of your retirement savings and the tax reliefs available.”
