Liz Truss’ plans to slash National Insurance could hit state pension
Campaigner appeals for state pension release for dying people
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Ms Truss is proposing to scrap the 1.25 basis point increase in employee and employer NI contributions if elected as Prime Minister, to boost the take home pay of millions of Britons. Her campaign team said previously they hope to bring about the change within weeks of her becoming the new Tory leader.
She has also set out to scrap the green levy on energy bills, in efforts to reduce the soaring bills facing millions of Britons going into the colder months.
Steven Cameron, pensions director at Aegon, warned reducing NI contributions could affect the state pension.
He said: “While reversing the increase would lead to an increase in take-home pay for some, it would not make any difference to those earning under the £12,570 National Insurance threshold.
“It would also create a shortfall in NHS and social care funding which would need to be filled through other means.
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“National Insurance contributions from today’s workers fund the state pensions of today’s pensioners, so the less is collected through NI, the greater the challenge of continuing to fund state pensions, which are expected to rise at a record double digit rate under the triple lock.”
The 1.25 percent increase came into effect in April this year as the Health and Social Care Levy, to help support the NHS in the recovery from the coronavirus pandemic.
The levy applies to contributions as employer Class 1, employee Class 1, Class 1A, Class 1B and Class 4.
Under the current policy, the levy will be in effect for one year and become a separate tax from April 2023.
Workers have just had a boost to their pay packet as the National Insurance threshold for the main rate has gone up from £9,880 to £12,570.
Government data suggests that this has benefited around 30 million people, with an average pay rise of £330 a year.
Increasing the threshold also means that around 2.2 million people are no longer paying Class 1 and Class 4 contributions.
Ms Truss has also pledged to keep corporation tax at 19 percent, scrapping plans to increase the tax to 25 percent from April 2023.
READ MORE: British Gas shares 15 tips for saving money on energy bills
The other contender for Prime Minister, Rishi Sunak, is proposing to slash income tax in efforts to improve the take home pay of struggling Britons.
The former Chancellor has set out to reduce the basic rate of income tax by 4p, from 20p in the pound to 16p, the largest reduction in 30 years.
The state pension is set to go up to more than £200 a week from next April, with the triple lock policy set to be reintroduced.
This policy guarantees that the state pension increases each year by at least 2.5 percent, or in line with average earnings or the rate of inflation.
Experts predict inflation will hit 13 percent in September, meaning a major boost to the state pension could be on the way, coming into effect next April.
Britons need to accrue 30 years of contributions to get the basic state pension, of £141.85 a week.
Workers will need to accrue 35 years of contributions to get the full state pension, of £185.15.
National Insurance credits are available for people on low incomes or on benefits to cover a period when they are not paying in.
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