General 17: End of Contracted Out National Insurance Changes for April 2016

Currently employees who pay in to the Local Government Pension Scheme or Teachers’ Pension Scheme pay a lower rate of National Insurance. This is known as ‘Contracted Out’ as the employee is not contributing to the State Second Pension, previously known as the State Earnings Related Pension Scheme (SERPS). This reduced the National Insurance on earnings between £486 and £3337 per month by 1.4% for employees and 3.4% for employers.

With the new single tier state pension, this reduction in National Insurance is removed and the increase could mean an additional amount of up to £478 per year for employees and up to £1163 per year for employers for the higher earners.

Communications will be sent out to DCC employees in the New Year, via pay advices and Insider. In the meantime, if you require any refer information please refer to the HMRC website.

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