Skip to content

National Insurance 'unjustified'

The National Insurance system is "riddled with anomalies, complexity and a lack of cohesion" and will be unjustified if plans for a universal state pension go ahead, a think-tank has claimed.

 

The planned £140-a-week universal state pension is set to be based on residency criteria rather than how many years people have made National Insurance contributions, and so the system is no longer fulfilling its original brief, the Centre for Policy Studies said.

 

The group has called for the National Insurance Fund, which it claims has been used for indirect tax rises and to fund other areas such as green taxes and the NHS, to be merged with income tax to create a single payroll tax.

 

Those who have paid into the system, at a rate of 11 per cent of earnings between £5,720 and £43,888, and one per cent above this figure, often receive lower benefits than those who made no contributions, the group said.

 

As well as creating a high marginal tax rate for low earners, this has increased costs for companies wanting to employ more staff, according to the report, written by tax and benefit analyst David Martin.

 

Just six per cent of benefits will be funded by the National Insurance system after incapacity benefit has been phased out, it added.

 

Copyright © Press Association 2010

'WESLEYAN’ is a trading name of the Wesleyan Group of companies.

Wesleyan Assurance Society is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Advice about investments, insurance and mortgages is provided by Wesleyan Financial Services Ltd. which is authorised and regulated by the Financial Conduct Authority. Personal Loans and savings accounts are provided by Wesleyan Bank Ltd which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Wesleyan Bank Ltd subscribes to the Lending Code which is monitored and enforced by the Lending Standards Board. Wesleyan Unit Trust Managers Ltd. is authorised and regulated by the Financial Conduct Authority.

Click for more information about the Wesleyan group of companies.

© 2015 Wesleyan Assurance Society