But the high income child benefit cap is based on the income after pension contributions
Increasing pension contributions can enable parents earning between £50,000 and £60,000 a year to save up to £18,500 in child benefit payments.
A Quilter analysis shows how complicated the system has become.
A family with two young children and a parent earning £59,000 could claim back over £18,500 over a 12-year period, if they increase their pension contributions by £467 a month.
It would cost someone £35,000 over this 12-year period to gain around £49,000 from the additional pensions tax relief and child benefit.
It also means that parents would increase their pension pot by £122,000 at age 65, assuming a 2% growth after charges and inflation.
A family with one child can claim up to £1,094 a year in child benefit and up to £1,800 for families with two children.
If one parent earns more than £50,000 a year, the household must pay back 1% of the child benefit they receive for every £100 over the threshold.
But the high income child benefit cap is based on the income after pension contributions. It means that paying more into pension can help families to fall below the threshold. As a result, the amount of child benefit they can claim increases and they can also benefit from the tax relief on pension contributions.
Quilter pensions expert Ian Browne says: The child benefit system is incredibly complicated and wage inflation has gradually pushed more people over the high income child benefit threshold meaning fewer and fewer families are claiming child benefit each year. At the most recent budget, the higher rate tax threshold has been frozen at £50,270 but the high income child benefit threshold of £50,000 has not changed with it meaning basic rate taxpayers will get caught for the first time.
Browne says there is still a significant proportion of people in the UK who are not saving enough for retirement and utilising this quirk in system could help them achieve their retirement aspirations.
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