Reason Nine to pay into a Pension Plan before April 2015

Avoid the child benefit tax charge:

·         An individual pension contribution can ensure that the value of child benefit is saved for a family, rather than being lost to the child benefit tax charge.  And it might be as simple as redirecting existing pension savings from the lower earning partner to the other.

·         The child benefit, worth £2,475 to a family with 3 children, is cancelled out by the tax charge if the taxable income of the highest earner exceeds £60,000.  There is no tax charge if the highest earner has income of £50,000 or less.  As a pension contribution reduces income for this purpose, the tax charge can be avoided.  The combination of higher rate tax relief on the contribution plus the child benefit tax charge saved can lead to an effective rate of tax relief as high as 64% for a family with 3 children.