Pension contributions could become more attractive to higher earning parents with planned changes to child benefit thresholds.
In the Budget, chancellor Jeremy Hunt announced the income threshold for the High Income Child Benefit Charge would increase from £50,000 to £60,000 in April.
Mike Ambery, retirement savings director at Standard Life, said those still eligible for the charge should take a look at their pension contributions to mitigate the impact.
He said: "If you’re still eligible for the charge, it’s possible to reduce the impact, and end up net better off, by increasing the amount you pay into your pension via salary sacrifice.
"Paying into your pension reduces what counts as your income, and it could allow you to keep your child benefit and boost your pension savings at the same time.
"When the change to basing the charge on household income kicks in some people will find salary sacrifice a more viable option than before as it will be possible for both earners to sacrifice more of their salary, retain child benefit and still have two good incomes - previously it could have made managing the monthly budget harder in the short term.
“The child benefit is worth a little over £2,600 a year to a family with three children, however it’s been means tested since 2013 and families with one parent earning £50,000 or over have been hit by the High-Income Child Benefit Charge."
Hunt also announced the charge will be halved from 1 per cent of the child benefit payment for every additional £100 earned above the threshold, to 1 per cent for every £200.
These changes will come into force this April with further plans to focus on household rather than individual income due to come at a later date.
Currently two parents earning £49,000 a year each would receive child benefit in full - but a household with one parent earning more than £50,000 would see the benefit cut.
On this point, Shaun Moore, tax and financial planning expert at Quilter, said: "This would address the glaring inequity where a dual-income household with each partner earning just under the HICBC threshold can access full child benefit and do not face any reduction in benefits, while in stark contrast, a single parent earning slightly over the threshold faces a reduction or total loss of this support after they earn more than the taper level, despite managing on a significantly lower household income.”
tara.o'connor@ft.com
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