National Insurance Contributions
Important information for employees
Removal of ‘contracted-out’ National Insurance (NI) Contributions from April 2016
What is ‘contracted-out’?
‘Contracted-out’ is where members of approved occupational pension schemes, such as the Local Government Pension Scheme (LGPS), Teachers Pensions Scheme (TPS) and NHS Pension Scheme, have been receiving a rebate of NI contributions.
What are the changes to NI contributions?
The Government is introducing a new state pension and, from April 2016, will remove the existing contracted-out NI contributions. This means that the 1.4% NI rebate that some employees currently benefit from will cease.
Who will this affect?
The changes will affect only those employees who currently pay contracted-out NI contributions (e.g. those employees who are in the Local Government Pension Scheme (LGPS), Teachers Pensions Scheme (TPS) or NHS Pension Scheme).
How do I know if I currently have ‘contracted out’ NI contributions?
You can check if you are contracted-out by looking at the NI Code on a recent pay slip - you are contracted-out if it has the letter D or E.
How will this affect my pay?
Employees who currently pay contracted-out NI contributions will start paying standard rate NI contributions from April 2016 and the rebate will cease, therefore increasing contributions by 1.4%.
You can calculate how this will impact you:
Will my occupational pension scheme change because of this?
No. You will continue to pay into your occupational pension scheme as you were prior to the changes.
Where can I find more information?