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Self-Employed: Pension Contributions

Volume 589: debated on Monday 11 May 1998

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asked Her Majesty's Government:What would be the impact on current National Insurance contribution rates of including the self-employed in SERPS on the same terms as they contribute to the basic pension. [HL1537]

The table below gives the increase in the joint National Insurance contribution rates in respect of employed earners which would be required if the self-employed are made eligible for SERPS but face no additional contributions themselves.

Per cent.
YearCurrent BaselineIncrease RequiredTotal Contribution Rate
2000–0117.70.017.7
2010–1117.40.017.4
2020–2116.80.116.9
2030–3117.20.317.5
2040–4115.80.416.2
2050–5114.00.514.5

Notes:

1. Estimates have been prepared by the Government Actuary based on the Third Quinquennial review (National Insurance Fund Long Term Financial Estimates HC 160).

2. The current baseline refers to the pension system as provided for in the 1995 Pensions Act.

3. The contribution rates given are those required to balance the NI fund by producing sufficient income to match expenditure on benefits and administration in each year shown.

4. The contribution effects assume that the self-employed pay Class 2 and Class 4 contributions on the same basis as they do now. If the self-employed themselves were to meet the cost of any entitlement to SERPS, it would be necessary to make policy assumptions concerning the restructuring of self-employed National Insurance Contributions in order to achieve this.

5. Assumptions are as follows:

  • (a) Price uprating of benefits and earnings limits.
  • (b) SERPS accruals for the self-employed would commence in 2000–01.
  • (c) No allowance has been made for any contracting out by the self-employed.
  • (d) The illustrative rates exclude the NHS allocation.