Pension tax break at risk

Wealthy families are being urged to snap up a little-used tax break by making pension contributions for non-working spouses and children, amid fears that the tax relief will be scrapped in the forthcoming Budget.

Currently, up to £3,600 a year can be invested in a pension by, or on behalf of, any non-earner at a net cost of just £2,880 after tax relief.

According to HM Revenue & Customs, about 30,000 children and tens of thousands of non-working spouses benefited from tax-favoured contributions in 2006-2007, the latest year for which figures are available.

However, Hargreaves Lansdown, the investment firm, said that because the tax break was largely used by the well-off, it could be an easy target for a cash-strapped chancellor.

Tom McPhail, head of pensions research, warned that the tax relief could be abolished after the Budget.