‘High-earning men face a state pension shortfall’
High earning middle-aged men will pay more in national insurance over their working lives than they get back in state pension income, analysis has shown.
Employees and the self-employed earning or making profits over a certain threshold are required to pay national insurance contributions, or a tax on earnings, which is used to help build entitlement to certain benefits such as the state pension or maternity allowance.
Research published this week by the Pensions Policy Institute, an independent research group, compared the contributions of those aged 20, 40 and 60 with how much they might receive in retirement.
Currently, employees aged 16 or over pay NI at 12 per cent on weekly earnings between £242 and £967. Additionally, NI is payable at 2 per cent on the slice of weekly earnings over £967. The self-employed will also pay NI on earnings, depending on their profits.
The PPI analysis comes as the government considers faster increases to the state pension age, and alongside debate over how future improvements to the NHS, and social care should be funded.
In September, the Truss government reversed a 1.25 percentage point rise in national insurance intended to help fund health and social care. The current crisis in the health service is likely to renew discussion over how improvements should be funded.
“While the analysis by the Pensions Policy Institute demonstrates that the vast majority of people across the income and age spectrums will typically receive back more than they have contributed, this is not going to be the case for middle-aged high earners, who are also shouldering a relatively high proportion of the total income tax burden,” said Jason Hollands, managing director of Evelyn Partners, the wealth manager.
“Whether or not it is by deliberate design, the system therefore has a creeping redistributive element to it that is likely to become more pronounced if the state pension age rises further, as seems inevitable given the costs of the system and rising life expectancy.”
This story originally appeared on: Financial Times - Author:Josephine Cumbo
