Money Makeover How can I retire while still raising two kids under 10?

Ex-policeman fears a high-income child benefit charge when his service pension kicks in. Lauren Almeida asks the experts

For most families, there are three great financial challenges in life: buying a first home, raising children and planning retirement. Worrying about one of these alone is difficult enough – but juggling them can be dizzyingly complex.

Stewart Brinn, a 54-year-old retired policeman from Lincoln, has two children under the age of 10. Having left the police in 2020, he now works parttime as a school business manager. Combined with his pension, this gives him an income of around £52,500 a year. His wife earns £28,000 a year.

“The police pension scheme comes with an inflation link starting from next year. I’m worried that we are going to get hit by a high income child benefit charge,” he said.

“We have some wiggle room as we are currently saving around £700 a month, and save £100 each into a savings account for our children. I’m currently contributing £ 93 per month into the Local Government Pension Scheme through my part- time job; should I be making additional voluntary contributions on top of this?

“I also want to keep saving for my kids, and at the moment their money is spread out across saving accounts and Premium Bonds. But should I be investing this money instead?”

Mr Brinn has a fixed mortgage at 1.76pc until the end of January 2026. There is £110,000 outstanding on the loan, with 14 years left to run. He plans to work for the next five to 10 years.

Lucie Spencer

Financial planning director at Evelyn Partners

Mr Brinn’s mortgage is running until his state pension age, so he could consider making overpayments to his mortgage or putting funds aside in order to pay a lump sum off when the fixed rate expires at the end of January 2026. This will save him interest over

The high income child benefit charge which Mr Brinn is currently liable of as he has an income of £52,000.

The child benefit amount that needs to be paid for every £100 of income above £50,000. the term of the mortgage, therefore leaving him with additional surplus income as he gets closer to retirement.

With an income of £52,000, Mr Brinn is currently liable for the high income child benefit charge of 20pc. This tax charge starts when one partner earns over £50,000 – 1pc of the child benefit amount needs to be paid for every £100 of income above £50,000. Once someone’s salary surpasses £ 60,000, the charge wipes out all of the child benefit.

There are ways to mitigate this. One option is to use salary sacrifice to reduce his taxable income by £2,000 and make additional pension contributions, therefore increasing the amount which he has in his pension from his gross pay and reducing his salary.

Another option is if his employer offers salary sacrifice to pay for childcare vouchers, again reducing his gross annual salary but potentially saving money on any childcare costs.

Should he contribute to a pension from his pre-tax earnings then this has the impact of reducing his salary. Therefore if Mr Brinn was to make a pension contribution of £ 1,600 – which will then be increased to £2,000 once 20pc basic rate tax relief has been added – this will reduce Mr Brinn’s salary down to £ 50,000, thus avoiding the high income child benefit charge.

Another way to avoid this charge is to make a charity donation using gift aid, declared on his self-assessment tax return. It also enables the charity to claim an additional 25pc from HMRC.

According to the Pensions and Lifetime Savings Associations retirement standards framework, a couple with £54,500 income in retirement can have a comfortable standard of living. When Mr Brinn receives his state pension, his income in that year could be around £50,090. And when Mrs Brinn’s pension income is factored in, they should have an income above this level and will be well provided for in retirement.

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There are several options in relation to the savings he makes for his children. A junior stocks and shares Isa can be opened by parents. This will then enable the child to withdraw the funds taxfree from age 18, and in the interim the funds grow free of capital gains tax and income tax.

Another option is investing in a pension for his children. This will benefit from 20pc tax relief from the Government, as well as tax- free growth. At present he could save up to £2,880 per tax year into a pension per child which, after tax relief, would increase to £3,600 per tax year. Mr Brinn should look at the long-term performance of indices such as the FTSE 250, S&P 500 and Nasdaq, which follow major British and American companies and have delivered returns of 52pc, 235pc and 571pc respectively over the past 10 years. There is no guarantee of future returns but this gives an indication of how stocks can perform.

Helen Howcroft

Head of women’s financial advice at Atomos

We would typically recommend investing for children rather than saving in cash because of the potential corrosive effect of inflation.

A Junior Isa ( Jisa) is a good tax- efficient option, however, Money in a Jisa can be accessed by the beneficiary at age 18 so, if this is important to him, he may choose to invest for them through an adult Isa in his own name and gift the money whenever he chooses.

Some passive funds we like for someone investing for growth, as in a Jisa, include the State Street Multi-Factor Global ESG Equity, which aims to repli

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Mr Brinn and his wife are currently saving a combined £ 700 a month. When he stops working in five or 10 years’ time, his police pension alone won’t enable them to cover their living costs and all regular savings will need to stop. He won’t be able to draw his local government pension scheme pension without paying a penalty, and he can only get his state pension from age 67, so he will need to think about how he will bridge that funding gap if he retires at 60.

They should check they are entitled to the maximum state pension and, if not, consider topping up. This is especially important for Mrs Brinn if she has taken time out of work to raise the family.

The couple still have 14 years left on their mortgage and this extends beyond Mr Brinn’s planned retirement date. They need to explore options for reducing this mortgage and paying it off while Mr Brinn’s earnings are still high. The mortgage will be coming off a low fixed-rate period in two years’ time and, if rates are at current levels then, they will see their monthly costs increase by around £225 pm, reducing their ability to save for retirement.

We would also always recommend that Mr Brinn and his wife retain three months’ take-home pay in cash, plus ad hoc expenditure over the next five years, such as replacing a car.

Mr Brinn also mentioned he expects that his children will go to university, so it is important to plan for these costs too. Our clients typically budget £750 pm for accommodation and living costs, but this does vary with where the child goes to university as living costs in London are far higher.