Why a rise in national insurance could make pension contributions ‘more appealing’
THE PROPOSAL TO INCREASE THE AMOUNT OF NATIONAL INSURANCE (NI) PAYED BY TAXPAYERS COULD MAKE PENSION CONTRIBUTIONS MORE ATTRACTIVE, according to an expert.
Ministers in the government allegedly began discussing ideas to raise National Insurance (NI) payments by 1% to fund social care reforms last week. According to estimates, the alleged idea is part of the government’s effort to solve the UK’s health and social issues and may raise upwards of £10 billion.
If the legislation is passed by Parliament, the average NI rate for employees earning less than £967 per week might jump from 12% to 13%.
NI payments are only paid by persons under the age of 66, which is the country’s state pension age.
With the reported idea, Prime Minister Boris Johnson has been chastised for waging a “intergenerational war” on young people.
According to Tom Selby, a senior analyst at financial platform AJ Bell, such a proposal could expose the government to criticism from the working-age population.
“It would also contradict a core Conservative manifesto commitment and expose the Government to accusations of an intergenerational robbery, with younger people paying for policies that immediately benefit older people, the vast majority of whom will be exempt from National Insurance,” Mr Selby said.
He did say, though, that if the increase in National Insurance contributions goes through, it will make pension savings “more appealing.”
“If NI rates are raised, salary sacrifice pension contributions will become more appealing, as they will benefit from both income tax and NI relief.”
“The government may try to pass this off as a distinct ‘social care fee’ from National Insurance contributions,” he added.
“On the surface, this would leave the government’s promise not to hike NI rates intact – but whether voters would see it that way remains to be seen.”
Mr Johnson has faced a ‘Cabinet Revolt’ following the revelation of a prospective NI hike, with Chancellor Rishi Sunak and Health Secretary Sajid Javid apparently being “uncomfortable” with the plans.
Mr Selby, on the other hand, expressed his support for the bill, claiming that raising NI contributions would be the “simplest” method to alleviate the country’s long-standing health-care crisis.
“After decades of postponement by successive governments, the coronavirus pandemic may be the disaster that finally forces politicians to.”Brinkwire Summary News,” he stated.