So where do pensions come into this? The good news is that adjusted net income is reduced by the amount of any pension contributions, so for clients with young children whose income is about to tip over the £100,000, making a contribution is a no-brainer.
In the above scenario, the first option would be to ask if the employer can make additional contributions instead of a salary rise, but if a personal contribution could be used to bring income below £100,000, this would mean the parent gets to keep not only their whole personal allowance but also all their free hours and top-ups.
Until the children reach school age it may be especially worthwhile to prioritise pensions over salary.
Childcare costs based on figures from Coram Family and Childcare Trust Childcare Survey 2022
Lisa Webster is a senior technical consultant at AJ Bell
