Using extra pension payments to keep child benefit

saucer

Hi all,
I am a frequent visitor/lurker to this page, but rare contributor. I write now to ask a question which is probably obvious, so please go gently! moreover I hope this is in the right forum, it is primarily about pensions but involves child benefit as well.

I am already paying a lot of money into a DB pension to keep some or all our child benefit. We have 3 children and it really helps, given I am the main earner, albeit on a good salary and in a good final salary pension.

I have recently had a pay rise which puts my salary after existing pension commitments at about £53000. This will incur a 'child benefit' tax/repayment charge of over £800 because it is over the £50000 lower limit for retaining it. I am not guaranteed that the pay rise will continue.

I am wondering:

1. whether, given that I will be liable to repay part of the CB if I don't pay more into pension, and that the pension contribution is taken PAYE (ie 40%), I should increase my pension payments

2. whether this should be into my existing scheme or something else like a private pension.


One thing I am thinking is that it is possible that I could (just) end up as a higher rate tax payer in retirement, all going well. This could make the potential tax benefits of topping up the pension now seem less attractive.

Your thoughts would be very welcome.

xylophone

http://www.aviva-for-advisers.co.uk/site/public/tech-centre/tech-article-detail/child-benefit-charge-planning

Pay into a private pension for flexibility?

You could choose not to draw down this pension but leave it as an inheritance?

You could defer your state pension?

You could retire early?

https://www.moneyadviceservice.org.uk/en/articles/tax-relief-on-pension-contributions

http://adviser.royallondon.com/technical-central/information-guidance/contributions-and-tax-relief/member-contributions-tax-relief-and-annual-allowance/

somethingcorporate

You don't know what the tax rates will be when you retire but as per the great post above mine there are a load of great reasons to pay the extra into the pension.

saucer

Thank you both for what are extremely to the point and helpful replies. Thanks especially to xylophone for the very useful links (although the second one seems to be broken). I think, that although the extra take home now might seem attractive, it would be far more sensible to put it away before tax

xylophone

(although the second one seems to be broken).

Strange! You can type Money Advice Service pension tax relief into Google and it will come up.

greenglide

Is this fairly academic pending on the budget later today when the higher rate relief on pension contributions (and the impact of pension contributions on Child Benefit?) are up for changing?

Purplesky_2

By that definition, all financial planning is fairly academic, but that doesn't mean you don't at least ask questions. There are almost no decisions that can't be reversed. Extra payments can be stopped, additional money can be put in, accounts can be moved.

They could do anything to any of the benefits or financial products that we currently enjoy. They could enforce that everyone is only allowed one sole current account and one joint current account, and everyone who is currently cycling money through multiple current accounts would have to make other arrangements.

greenglide

But the one being discussed here is currently under debate, the others are not (as much).

xylophone

It could be under debate for a long time.... in the meanwhile, make hay while the sun shines.....:)

Harrumph

Can you also pay more into a pension to reduce income to avoid paying full market rent in social housing, as has just been announced in the budget?

d70cw6

wait he has social housing and is a higher rate tax payer? O.o