National Insurance

... earners, because, you know, the whole Labor manifesto is not to tax working people.

And this, so this has come from the national insurance employer contributions.

And the freezing of the thresholds-

Yes

in income tax.

Yes.

So it does also come somewhat from individuals paying more too, but yes, a lot of it is the employer national insurance.

This is a horrible question [laughs] to ask you.

So that's one aspect, and the other is frozen tax thresholds.

Um, so this, uh, economic phenomenon called, uh, fiscal drag, um, which is-- So yeah, the, the, the, the various income tax and National Insurance thresholds have been frozen since, uh, 2021 and will remain that way until 2031.

So if we go back to 2021, the state pension, um, the, the full state pension paid around 9,300 a year The personal allowance was, yeah, 12,570, which is the same as what it is today.

Fast-forward to today, as you say, personal allowance is still at the same level, but the state pension, um, due to the increases under the Triple Lock, is now 12,548, so it's just below the, the personal allowance.

This is called salary sacrifice.

If you pay into a workplace pension, there is a good chance you are already using it, and it is potentially saving you and your employer hundreds of pounds a year in national insurance.

However, from April 2029, that saving is getting capped.

The first £2,000 you sacrifice into your pension each year stays free of national insurance, but everything above that is going to get taxed like ordinary pay.

3.3 million workers are in scope for this tax change, and the people who lose out the most are not the highest earners.

They are actually those who sit somewhere between about 45 and £50,000 of gross earnings.

So what that does, it means it stops being pay.

It, it instead becomes a pension contribution that your employer makes for you before it goes, before it becomes any kind of conversation around salary.

That is lottery winner money.

And assuming those people have all, you know, have the right entitlement via national insurance, they are all also entitled to the state pension.

So my argument was to pay all of those people who have three million pounds in their private pension pot, the state pension would cost 527 million pounds a year.

So just on the people with three million, you're looking at half a billion a year.

And like I said, you know, 10 grand a month, you don't need an extra, you know, sort of 240 quid a week.

So, yeah, you could argue for means testing the state pension and just saying, look, if you've got this much in a private pension pot, then you don't need it.

Or there are other things you could take by challenging the whole system of national insurance itself.

But yeah, the pensioners love this.

And on a small pot, that's where the real pressure starts to hit.

and that is why protecting the pot in your 60s matters so much it's not just about reaching 67 it's about having something left when the expensive years start to arrive now i've worked with plenty of people who have retired on pots this size and the ones who did it well all had one thing in common as i said earlier on you might not want to hear it but they kept working part-time until the state pension arrived now i appreciate it's not glamorous but it does work So the one thing I would do is this if you were in a similar circumstance and that is to check your state pension forecast at gov.uk and if you've got gaps in your national insurance record you can buy back yours for about £900 each and every year that you buy adds roughly £350 a year to your state pension and that's for life.

So on a pot this size, that could be the single best investment you will ever make.

If you're in this position right now, I would love to hear how you are planning it in terms of when you might take your retirement and what you're planning on spending.

Low and middle income earners and women are the most exposed to this problem, and y- y- the report goes on and on, and you just read it, and you think, "Oh my Lord." So set the scene, right? If you have saved nothing, what is gonna happen when you retire? What are you gonna live on?

So look, if you've saved nothing in a either auto-enrolled or opt-in pension system, but you have been contributing via National Insurance, you will have a state pension.

Mm-hmm.

Um, so that's a good thing.

one,

one of the big ones happened, it went live in April 25, not April 26, but this was the change to national insurance that came out then.

So in April 25, the employer's national insurance rate increased from 13.8% to 15.8%.

Now, on the face of it, it doesn't sound like a lot.

1.2% doesn't feel like much.

But actually, when you do the maths and you actually see it in practice, that is quite a big spike.

The other thing that changed was the threshold from when you started paying employers national insurance.

It was originally 9,100.