The government has announced changes to National Insurance contributions from April 2016 as a direct consequence of changes to the State Pension.
Who is affected
- Kent staff who are below State Pension Age and are members of a ‘contracted-out’ occupational pension scheme such as USS or SAUL.
For all other staff, National Insurance contributions will remain unchanged.
What this means for USS and SAUL members
From 6 April 2016, USS and SAUL members will no longer receive the 1.4% National Insurance rebate and will pay a higher rate of National Insurance, with contributions increasing from 10.6% to 12% on middle band earnings (ie earnings between £8,064 and £40,044 per annum in the 2015/16 tax year).
Why is this happening?
The change in National Insurance contributions is happening as a direct consequence of a change in the State Pension which will also take effect on 6 April 2016.
Currently, the State Pension is made up of two parts:
- the basic State Pension
- the additional State Pension (often referred to as the State Second Pension (S2P) or previously SERPS).
Members of USS and SAUL are ‘contracted-out’ of the additional State Pension and consequently pay National Insurance at a lower rate.
For people who reach State Pension Age on or after 6 April 2016, a new State Pension will replace the existing basic and additional State Pension, which will end the practice of contracting-out. As a consequence, all staff will pay the same ‘contracted-in’ rate as they build up the new State Pension in addition to their workplace pension.
How can I check if this affects me?
Members of USS and SAUL will be affected. For confirmation, staff can check their payslips to find out the rate of National Insurance contributions they are paying. Contracted-out National Insurance contributions will have the letter ‘D’ next to the National Insurance number on their payslip. Payslips could also show the letter ‘E’,’ I’, ‘K’, or ‘L’. Employees are not contracted out if the payslip has a letter ‘A’, ‘C’, ‘J’, ‘M’, ‘X’ or ‘Z’ and their NI contributions will be unchanged.
A National Insurance calculator is provided by HMRC. Please note that this provides information based on 2015/16 NI rates but will give an indication of the additional cost.
For further information on the changes and the effect on workplace pensions, see:
For more information, please contact Wendy Green in HR – W.Green@kent.ac.uk, ext 4982.