Changes to the State Pension and the effect on National Insurance Contributions
The current State Pension is made up of two parts: the basic State Pension and the additional State Pension (the additional State Pension is sometimes called State Second Pension or SERPS).
Members of our occupational pension schemes are classed as 'contracted-out' of the additional State Pension. This means that employees and employers pay National Insurance (NIC) at a lower rate.
While this means less national insurance is paid it also means there is little or no additional State Pension available as members have been building up their occupational pension instead. Your entitlement to the basic state pension is not affected.
What is changing?
From 6 April 2016, there will be a new State Pension for people reaching State Pension age on or after this date. This change will help people better understand what they will get from their State Pension so they can plan for their retirement.
The new State Pension will be paid if you are a man born on or after 6 April 1951 or a woman born on or after 6 April 1953.
Employees reaching State Pension age before 6 April 2016 – men born before 6 April 1951 or women born before 6 April 1953 – will receive the current State Pension and the change will not have an effect.
When the new State Pension is introduced it will replace the existing basic and additional State Pension.
It will also end contracting-out (of the additional State Pension) and the National Insurance rebate.
What this means for you
From 6 April 2016, members of our occupational pension schemes will no longer receive the 1.4 per cent National Insurance rebate and will pay the standard rate of National Insurance. Most people who are contracted-out will be able to get more State Pension as a result of these changes than they would have under the pre-April 2016 system.
Below are some examples showing how much extra National Insurance contributions will be payable from April 2016 compared to the equivalent amount due before the changes.
| Annual Pay | Monthly Pay | Current NICS | Revised NICS | Increase Per Month |
| £8,064 | £672 | - | - | - |
£10,000 |
£833 | £14.47 | £19.32 | £4.85 |
| £15,000 | £1,250 | £58.66 | £69.36 | £10.70 |
| £20,000 | £1,667 | £102.87 | £119.40 | £16.53 |
| £25,000 | £2,083 | £146.96 | £169.32 | £22.36 |
| £30,000 | £2,500 | £191.16 | £219.36 | £28.20 |
| £35,000 | £2,917 | £235.37 | £269.40 | £34.03 |
| £40,000 | £3,333 | £279.46 | £319.32 | £39.86 |
| £45,000 | £3,750 | £312.85 | £352.76 | £39.91 |
| £50,000 | £4,167 | £321.19 | £361.10 | £39.91 |
| £55,000 | £4,583 | £329.51 | £369.42 | £39.91 |
| £60,000 | £5,000 | £337.85 | £377.76 | £39.91 |
How the changes affect workplace pension
Our occupational pension schemes will not change as a result of the introduction of the new State Pension.
How the changes affect your State Pension
Under both the current and the new schemes, the amount of State Pension you receive will take account of any time that you have been contracted-out and paid National Insurance at a lower rate.
Most people who are contracted-out will be able to get more State Pension under the new scheme as a result of the changes compared to under the current scheme.
More information
- For information, videos and graphics about the current and new State Pension take a look at the State Pension toolkit
- Find out how your State Pension is changing and how much you may receive
- Work out your State Pension age using the State Pension calculator
- More information on the changes and how they affect you from the Money Advice Service