Category: NIC & Pensions

The Chancellor announced pension fund reforms as a further step in the government’s plan to boost British business and increase returns for savers. This includes requirements for Defined Contribution (DC) pension funds to publicly disclosure their level of investment in the UK.

Under the plans:  

• By 2027 DC pension funds across the market will disclose their levels of investment in British businesses, as well as their costs and net investment returns. 
• Pension funds will be required to publicly compare their performance data against competitor schemes, including at least two schemes managing at least £10 billion in assets. 
• Schemes performing poorly for savers won’t be allowed to take on new business from employers, with The Pensions Regulator (TPR) and Financial Conduct Authority (FCA) having a full range of intervention powers. 

The plans are subject to a consultation by the FCA and build on the Government’s Mansion House compact, that encouraged pension funds to invest at least 5% of their assets in unlisted equity. 

The second review of the State Pension age has been published by the Department for Work and Pensions. The State Pension age is currently 66. The review has stated that a further increase in the State Pension age to 67 for those born on or after April 1960 will take place as planned between 2026 and 2028. Following this announcement, the government has confirmed the State Pension age will rise to 67 by the end of 2028.

The Pensions Act 2014 requires the Secretary of State for Work and Pensions to regularly review the State Pension age. There had also been plans for a further gradual rise in the State Pension age to 68 between 2044 and 2046 for those born on or after April 1977. The government plans to have a further review within two years of the next Parliament to reconsider the rise to age 68.

This will ensure that the government is able to consider the latest information to inform any future decision on the State Pension age. This will include life expectancy and population projections, the economic position and the impact on the labour market. 

The government has said they remain committed to the principle of providing 10 years notice of changes to State Pension age, enabling people to plan effectively for retirement. All options for the rise to the State Pension age from 67 to 68 that meet the 10 years notice period will be in scope at the next review.

The Prime Minister announced increases in National Insurance Contributions (NIC) of 1.25% from April 2022, to contribute to increases in the NHS and social care budgets.

The increases will apply to:

• Class 1 contributions (paid by employees). This is the NIC that is deducted from your earnings by your employer.
• Class 4 (paid by self-employed). These contributions are added to your annual Self-Assessment statement.
• Secondary Class 1 (paid by employers). Employer's NIC contributions are paid as part of the regular PAYE/NIC payments unless they are covered by the present £4,000 employment allowance.  

This increase will need to be factored into employers' budgets from April 2022. Self-employed persons will not see the impact of the increase until their Self-Assessment for 2022-23 is completed. 

From April 2023, these increases will be incorporated into a new Levy. Existing NICs reliefs to support employers will apply to the Levy. Companies employing apprentices under the age of 25, all people under the age of 21, veterans and employers in Freeports will not pay the Levy for these employees as long as their yearly gross earnings are less than £50,270, or £25,000 for new Freeport employees. The Levy will be administered by HMRC and collected by the current channels for NICs – Pay As You Earn and Income Tax Self-Assessment. The Levy, including the temporary NICs increase in 2022, will be legislated for shortly.

You can apply for a National Insurance number if you live in the UK and have the right to work in the UK. You must also be looking for work or have an offer to start work in the UK. If you have already started working you can still apply.

Make sure you’re eligible before you apply for a National Insurance number. If you already have one you will not be sent a new one.

You do not need to apply if you:

• have lost your National Insurance number,
• are a UK resident aged 19 or under,
• have a biometric residence permit which has a National Insurance number printed on it,
• are applying for benefits or a student loan.

If you’re a UK resident aged 19 or under you will normally be sent a National Insurance number automatically, in the three months before your 16th birthday, if both the following are true: that you live in the UK and a parent has filled in a Child Benefit claim form for you

If you are aged 16 to 19 and did not get a National Insurance number, call HM Revenue and Customs.

If you do not have a National Insurance number, you must apply for one if you plan to work. You can only apply when you are in the UK.

You do not need a National Insurance number to apply for benefits or a student loan. You will receive one if your application for benefits or a student loan is successful.

The State Pension age has been increasing since April 2010. The changes will see the State pension age gradually rise to 65 for women between 2010 and 2018, and then to 66, 67 and 68 for both men and women by 2039.

There are now many taxpayers that have reached the State Pension age and continue to work. In most cases they no longer need to pay any National Insurance Contributions (NICs).

At State Pension age, the requirement to pay Class 1 and Class 2 NICs ceases. However, you will remain liable to pay any NICs due to be paid to you before reaching the State Pension age. If you continue working, you need to provide your employer with proof of your age.

Your employer remains liable to pay secondary Class 1 employer NICs. If you would rather not provide proof of age to your employer you can request a letter (known as an age exception certificate) from HMRC confirming, you have reached State Pension age and are no longer required to pay NICs.

Planning note if self-employed

If you are self-employed you will need to pay Class 4 NICs for the remainder of the year in which you reach State Pension age but will be exempt from the following year. We can help you check if you think you may have overpaid NICs and arrange for a refund of any overpaid NICs.