"Scrapping national insurance": impact on state pension

[NoFunNoFrills]

Posting here as I followed with interest the recent "what will eventually happen with the state pension" thread.

Seems there is talk about scrapping national insurance one day in the not too distant future (article mentions 5 years). Does this feels like a precursor to abolishing the state pension eventually?

I never knew this was being considered until I saw this article today.

Thoughts???

https://www.theguardian.com/uk-news/2024/mar/07/income-tax-likely-to-go-up-if-national-insurance-scapped-hunt-suggests

They are running out of things to cut and desperately clutching at things to cut in terms of taxes as they are tories. I think it will also have an effect on NHS funding? Overall it's a very short termist (what else) policy.

It's hard for say. I think the point they are making is we pay two taxes: income and ni and it's better to just simplify it and to have one. I suspect it will mean we pay more income tax as your combining two taxes into one. So there should be some savings in public sector not needing a whole department looking after NI, not to mention on software needed etc.

I don't really see why we need two specific taxes, money is just allocated where it needs to go. I supposed currently it means money is ring fenced in a way but again don't really need two taxes to ring fence money for certain things.

Then again there have been papers about how the state pension will be become difficult to pay in the future. I think it'll go means tested before they ever scrap it entirely.

National Insurance is one of the only things that is genuinely worth it. DH has has definitely got his money's worth from the NHS. It's the most stupid thing to scrap imo.

Yes, it's so short sighted. I forgot there is more to NI than pensions.

With the pension issue I wonder with stopping NI they might phase out the state pension.

• So maybe someone who is 55 now, will get the full state pension (even if NI is scrapped now) because they have paid all their years of contributions.

• But a 30 year old might have only paid 10 years contributions by the time NI is scrapped, so when they retire they will get a lesser amount relative to what they paid.

• Whereas a 19 year old might not ever pay any NI, so will get no state pension.

National Insurance money isn’t ringed fence for anything; pensions or NHS it all just goes into the general tax pit. And people over retirement age who work don’t at it - so is unfair on those who do. Makes sense to abolish it.

I don't think scrapping national insurance means scrapping the things it "pays for". NI doesn't cover the cost of the NHS or the state pension for a start .

I wonder how it would work for pensioners and people who work two jobs because presumably they would pay more than they do now.

You're right behind the scenes it's just one giant pot but to joe public we think of it as ring fenced because its commhnicayed to us that we pay NI to cover pension etc.

You can't scrap the state pension unless you are willing to have elderly people living on the street and starving to death. Yes it would be great if everyone made their own pension provisions but reality is many people don't.

They'll just adjust income tax- there's no reason it should make any difference to state pension at all as NI doesn't fund the state pension.

Seems good to me. Simpler and avoids the daft situation where someone making £20k on investments pays in less than someone earning £20k from work.

It's all just tax. The advantages of scrapping it and raising the overall income tax % (which surely js what they'll have to do) is that pensioners or those not working and living off investments will pay a higher rate of tax on their income as currently NI is only paid in earnings through paid employment,

True, it isn't ring-fenced, and i know they would put income tax up. But right now a person has to make so many years NI contributions to be eligible for the state pension, so they would need to reform the "contribution" aspect too. I wondered if it was a stealth way to stop the state pension because the younger you are, the less NI contributions you would have made, so the less state pension you're eligible for. They might say - for example - "put the money you normally pay for NI in your private or workplace pension". People have already said that about the 2% cut - just stick that money straight in a private pension.

The government pay a lot of NI credits on behalf of people, if you're in receipt of child benefit or a number of other benefits for example to make sure people are not losing out on their contributions.
Also there's an option to pay into your NI contributions if say you haven't paid enough some of the years so you don't lose those years.

They could just simplify benefits althogether saving a fortune to spend on important things by going with a UBI. They don't want to do that though.
Most people like actual socialism, money all paid in that pays for services for all. They just don't like to admit that that's what proper socialism is and a lack of it is what is fast eroding societyl

Well they can simply say u need x years of paying income tax instead. Same thing you have x yrs of a tax

I wonder what will happen about Employers Contributions. Its one of the few taxes employers like amazon struggle to avoid.

There would have to be "tax credits" for the low paid and carers who currently get NI credits to count toward their eligibility for the state pension and some other benefits

Politicians speak with forked tongues. I want to know what it's going be replaced with and what is going to be "reformed" aka axed and last, but not least, what we'll have to start paying for and what will go by the wayside.

With the Tories there's only one guarantee and that's Joe public will pay the bill.

Surely that's what they are doing with the freezing of the income tax thresholds until 2028. That allows them to reduce and then remove NI whilst actually increasing the amount, in real terms, of income tax people pay relative to the value of money without ever actually saying "We're increasing income tax."

Think they want to phase out benefits state pension and child benefit. I paid in for over 46 years but due to my works pension I had to pay another £800 to get full state pension. However I am very grateful for it

I'd be glad to see it scrapped and just rolled into one income tax. It's a regressive tax as you pay less on income above the upper limit, not more.

I wonder if state pension could end up means tested like UC.

When you are out of work or on carer's allowance you get credited class one national insurance...

Basically I have spent years caring for disabled children unable to work due to the number of appointments and time out of school...

It's a bit worrying.

I think it will be rolled into one tax eventually. The means testing of state pension will be one to watch as I can imagine that this may disincentivise people to have a private pension or pay more in. We’ve already got an issue with the squeezed middle. You’ve also got thousands of people who have paid NI contributions for years and would therefore expect to get a state pension as a result. It would be a sure way of losing votes as you’ll have generations of angry older people who have been told that they need x number of years of NI to get full state pension. They really need a long term plan, 5 years to phase out NI and what it looks like beyond this does not seem like long enough to plan and enact. Although hopefully the tories won’t be in government for years to come!

Australia has a compulsory percentage on top of income that employers must pay into private pensions so there is no avoiding it if you are an employee. Then the state pension is reduced by 50 cents in the dollar above a income threshold.