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Home Finance National Insurance threshold hike must not impact state pension entitlement

National Insurance threshold hike must not impact state pension entitlement

by uma

 

  • In April 2022 the Health and Social care levy comes into effect. This is a 1.25 percentage point increase on National Insurance contributions.
  • It has been introduced to support the NHS.
  • The Chancellor had been under pressure to scrap the increase in the face of the rising cost of living issue.
  • Instead, he opted to soften the blow by increasing the threshold at which people start paying National Insurance by £3,000 to £12,570.

In today’s Spring Statement the Chancellor announced a rise in the National Insurance threshold to £12,570.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown

“The Chancellor has been steadfast in his determination to implement the Health and Social Care levy, but his actions today have at least helped lower earners by raising the threshold at which they would have to start paying it. These actions will put some money back in their pockets at a time when costs are on the rise.

However, by lifting the threshold, care must be taken that workers earning less than £12,570 per year do not lose access to vital National Insurance credits for state pension. The state pension forms the backbone of most people’s retirement and therefore, they should ensure they do not incur gaps unnecessarily, that mean they end up with less in retirement.

Many benefits come with automatic National Insurance credits. For instance, Child Benefit, Universal Credit and Job Seekers Allowance will credit you automatically. Other benefits such as statutory sick pay will give you credits if you apply for them. It is therefore vital people worried they may no longer be getting National Insurance credits check to see what benefits they are entitled to, so these credits can be made.

A further option for people looking to plug gaps in their state pension record is to buy voluntary National Insurance credits. Each missing year costs around £800 and will give you 1/35th of your entitlement. Over the course of retirement they can be a very good value way of boosting your state pension entitlement.”

You should get automatic National Insurance credits if you receive the following benefits

  • Universal Credit
  • Jobseekers Allowance
  • Employment and Support Allowance
  • Maternity Allowance
  • Child Benefit
  • Carers Allowance
  • Income Support

You may be able to claim National Insurance credits in these instances

  • If you are unemployed and looking for work but not claiming Jobseekers Allowance, you can contact your Jobcentre to claim credits.
  • If you are on Statutory Sick pay and you do not earn enough to make a qualifying year NIC, you can still claim. The same goes for statutory maternity, paternity or adoption pay.
  • If you are caring for one or more sick or disabled person for at least 20 hours a week and you don’t claim Carers Allowance or Income Support.
  • You are under state pension age and you look after a child under the age of 12 you may qualify for Specified Adult Childcare Credit.

For more information and how to claim go to National Insurance credits: Eligibility – GOV.UK (www.gov.uk)

 

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