If you are an active member of one of the Pensions Scheme the University administers (i.e. TPS, GMPF or USS) your National Insurance (NI) contributions will increase from April 2016. At the same time your employer National Insurance contributions will also increase.
If you are not a member of one of these Schemes, or if you earn less than £672 per month, you will not be affected.
Why is this change happening?
The government is introducing a new single tier state pension from April 2016. The current state pension is made up of 2 parts: Basic State Pension (BSP) and Additional State Pension (ASP). As a member of a defined benefit pension scheme you were contracted out of the ASP, paid lower NI contributions and built up no benefits in the ASP. Instead you built up benefits in TPS, GMPF or USS As a result of the new flat rate state pension, contacting out will end in April 2016.
How much more NI will I have to pay?
Employee contributions will increase by 1.4% to 12% on earnings up to £40K. All earnings above £40K will remain at 2%. The table below provides an illustration:
|Member’s gross earnings||NI payable currently||NI payable from 6 April 2016||Difference|
|£15,000 per year
(£1,250 per month)
|£58.66 per month||£69.36 per month||£10.70 per month|
|£27,000 per year
(£2,250 per month)
|£164.66 per month||£189.36 per month||£24.70 per month|
|£45,000 per year
(£3,750 per month)
|£307.65 per month||£347.56 per month||£39.91 per month|
Note: The examples above assume you are over 21 years and are based on the current NI thresholds (2015/16),
Why should employees still consider being a member of one of our Pension Schemes?
The new State Pension will only provide a very basic level of income in retirement meaning that occupational pension schemes, such as those offered in the HE sector will remain a very important part of retirement planning. Members who continue to pay into a pension scheme currently receive tax relief on their pension contributions, as contributions are deducted from pay before tax is calculated.
In addition, Pension Schemes offer other valuable benefits such as life cover, spouse, child or dependants’ pensions and ill health pensions. These are costly benefits to provide outside of an occupational pension scheme.
Further information on the State Pension reforms can be found at:
Individuals over age 55 can request an estimate of the State Pension they will receive under the new system, here :
If you wish to calculate your state pension please see:
If you have any queries please contact Martin Evans by email at ku.ca1575716616.notl1575716616ob@sn1575716616avE.M1575716616
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