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MoneyWeek article- How pension contributions can boost your child benefit eligibility

Journalist: Marc Shoffman, Freelance

ended 14. March 2024

Him

I am writing a piece for MoneyWeek this morning looking at the child benefit reforms.

I am keen on comments on how higher earners can boost how much they get in child benefit by increasing their pension contributions to effectively reduce their earnings.

How are are people about being able to do this? How much difference does it make? Will it become more common?

Kind regards, Marc

2 responses from the Newspage community

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Scott GallacherVerified
Director at Rowley Turton
We've been proactive in advising clients in the £50-60k earnings band to make pension contributions, saving them from the High Income Child Benefit Charge (HICBC).

For instance, someone in this bracket with three young children could see around a 69% tax benefit on their pension contributions under the old rules.

The new rules will lift many out of this trap, reducing the number who would benefit in the same way from making pension contributions. However, it will bring others into the range where pension contributions now make even more sense.

For example, previously, someone earning £80k needed to contribute over £20k gross to see an impact on their Child Benefit position. Whereas now £200 will have an effect.

Though the change from £100 to £200 'excess' income resulting in a 1% loss of Child Benefit reduces the HICBC benefit of making pension contributions, it remains a strategic option for many higher-earning families.
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Joshua GerstlerVerified
Chartered Financial Planner at The Orchard Practice
If you are earning between £60,000 and £80,000, you will lose 1% of your Child Benefit for every £200 you earn over £60,000.

The earnings that the government look at are your "adjusted earnings". A contribution you make into most pensions will reduce your adjusted earnings.

Lowering your adjusted earnings can then increase the amount of Child Benefit that you get to keep whilst at the same time providing a great boost to your pension.