Contributions from retirees of health and social services will not allow building the state pension | Personal Finances | Finance


This will dismay those who reach state retirement age without having made enough contributions to the NA to qualify for the new maximum basic state pension. If they continue to work after retirement age from 2023, they will pay the 1.25% levy on their income, but this will not cover their shortfall.

Retirees who make NI contributions under 35 during their working life are not entitled to the State Basic Full Pension of £ 179.60 per week and will receive a reduced sum instead. Those who contribute less than 10 years receive nothing at all.

Many of those who turn 66 without touching the full amount will have to keep working to make ends meet. They might not want to pay the new 1.25% levy on their much-needed income because it won’t help close their state pension deficit, said Sandra Wrench, pension expert.

Sandra, 69, has worked for the Department of Work and Pensions for more than 40 years, including two decades retired from the state, and helps her friends and family to get a fair deal with the DWP .

Many of those who continue to work after 66 are forced to do so because they are not entitled to the basic full state pension.

Now they will pay the new national insurance levy, but unlike the standard National Inspector contributions, this will not help them build up an additional state pension, Sandra said. “NI contributions have always been associated with benefits and contributions to your state pension, but the new levy for active retirees breaks that link. “

Currently, once you have reached retirement age, you no longer have to contribute to national insurance.

This rule will continue to apply to state pension income and to any income from an occupational pension, personal pension or savings.

However, starting in April 2023, people over 66 who continue to work will have to pay the new NI tax for health care and social benefits on any income they earn from employment, to help solve the social care crisis.

It’s part of a program designed to raise £ 36bn over three years for the NHS and the healthcare system.

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Employees below state retirement age will also pay the 1.25% levy, which will cost someone with an average salary of £ 30,000 per year an additional £ 255 in contributions to national insurance.

The highest earners with £ 50,000 will pay an additional £ 505, while those earning £ 75,000 will pay an additional £ 818 per year.

This is in addition to the NI they already pay, which is billed at a punitive rate of 12% on income between £ 9,568 and £ 50,270. However, this creates the right to state pension.

Sandra Wrench said the new levy will be separate from NI’s, so active retirees will only pay 1.25%. “However, it won’t count towards their state pension, even if they have a deficit.”

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Once you reach state retirement age, it is no longer possible to build up other state retirement benefits, Sandra said. “This is why people are no longer billed for NI dues from this age on.”

The tax on health care and social benefits is separate from national insurance, so it will not be used to increase the state pension. “It will be a blow to those who have not reached the new state full basic pension, because of the way it is calculated.”

She said the government had no incentive to change this. “He could then end up paying more in additional state pension than the NI contributions he collects from active retirees.”

Sandra added: “The only way to increase the amount of state pension owed to you after age 66 is to defer it.”


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