Government brings forward NI increases for DB pensions

Budget 2013: The government has brought forward an increase in national insurance contributions (NICs) for employers with contracted-out defined benefit (DB) pension schemes by a year.

The move results from Chancellor George Osborne’s confirmation in his 2013 Budget speech that members of a DB scheme will no longer be able to contract out of the State Second Pension from 2016/17. This means that both they and their employers will no longer be entitled to pay lower NICs.

To alleviate the impact on private sector employers, the government has committed to legislating for a statutory override, which will allow private sector employers to cover the costs of additional NIC payments through changes to contribution rates or benefits for their existing pension schemes.

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Malcolm McLean, consultant at Barnett Waddingham, said: “We eagerly await the government’s consultation on how companies will be able to amend their pension schemes to mitigate these costs. 

“Of course, the costs will be offset a little (by £2,000 per employer) but only the smallest employers will probably notice the difference.”