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Home Finance PPI analysis shows national insurance contributions outstripped by state pension pay-outs

PPI analysis shows national insurance contributions outstripped by state pension pay-outs

by Staff GBAF Publications Ltd


  • The Pensions Policy Institute has updated analysis on how the proportion of projected national insurance contributions paid stacks up against the amount of state pension received.
  • The analysis looked across genders and income brackets for people aged 20, 40 and 60 in 2022.
  • In most cases, the amount of state pension received far outstrips the amount of national insurance contributions paid.
  • For instance, a 60-year-old man in 2022 in the 10th earning percentile could see 36% of his state pension paid for through his national insurance contributions. For a top earning 60-year-old man, the proportion would be around 79%.
  • However, a top earning 40-year-old may find his national insurance contributions slightly outstrip the amount of state pension he ends up with (101%). This is due to increases in state pension age, national insurance contributions and increasing longevity.

The Pension Policy Institute has published analysis on how the national insurance contributions of people of different ages, genders and income brackets stack up against how much state pension they could receive:  https://www.pensionspolicyinstitute.org.uk/media/4253/20230109-nics-and-statepen-post-proof.pdf

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:

“We’re getting far more out of the state pension than we’re putting in – adding fuel to the fire of the debate over the pension age.

This analysis will provide further food for thought in the ongoing debate on whether the state pension age needs to be hiked further in the coming years. In virtually every case, the average amount of state pension received far outstrips the amount of national insurance contributions that people pay in over the course of their lifetime. In the various circumstances modelled, only top earning men aged around 40 could potentially find themselves paying slightly more national insurance than they receive in state pension over the course of their lifetime.

Over time as national insurance rates have increased and state pension ages have been extended, we’ve seen the proportions increase and this could add further fuel to the argument that we need to see further state pension age hikes. However, this does need to be balanced against healthy life expectancy and the fact that people are only capable of working for so long. As debate continues to rage over the long-term viability of the triple lock, the time has come for a review of how the state pension is uprated to give people long term confidence in their retirement planning.”