I understand that it's tempting for you to stop saving for a pension but it doesn't seem a very good idea unless you are really desperate financially and you don't sound like it. Even with the reduction in pension tax relief you still benefit from generous employer's contribution, and over time, if invested wisely, you should build up a substantial nest egg for your retirement.
However, building an adequate emergency fund is very important, so I suggest you concentrate on that, reducing your AVC still further if necessary, but only temporarily - when your emergency fund is saved, you can increase AVC again.
Also your wife may not stay at home forever - once your child grows up a bit, she may go back to work and your financial situation improves, allowing you to contribute more to AVC. It would be a pity to throw away the opportunity to build up a pension.