The 2022 annual report on the National Insurance Funds

Focus on the National Insurance Fund

The Government Actuary has published the annual report on the National Insurance Fund (NIF) for Great Britain.

The report:

  • projects contribution income, benefit payments and the balance of the NIF over the coming financial years
  • is a source of information for MPs who scrutinise the government’s draft legislation for up-rating social security benefits and pensions and updating National Insurance contribution (NIC) terms

National Insurance contributions are split between the NHS and the NIF.

Headline results

The Up-rating report shows the NIF is projected to be in surplus in each of next 5 years, although that surplus will generally decrease each year. The surplus in the next financial year (2022 to 2023) is projected to be £7.8 billion, which would take the NIF’s balance to £60.5 billion at 31 March 2023.

These figures mean that it’s not anticipated there will be any payment required to the NIF from HM Treasury over the next 5 years.

GAD’s findings for 2022 to 2023

The majority of benefits payable from the NIF (predominantly state pension payments), are proposed to increase by 3.1% in April in line with the September 2021 CPI increase. This results in additional NIF costs of £3.4 billion in 2022-2023.

The cost to the NIF of uprating National Insurance contribution thresholds is around £1.4 billion in 2022-2023.

Health and social care

As a result of the Health and Social Care Levy Act 2021, for the 2022 to 2023 financial year there will be a temporary 1.25% rise in National Insurance contributions to raise money for the NHS.

Due to the way the calculation is performed, the extra amount paid to the NHS will be around £2.9 billion higher than the extra contributions collected. This means the NIF will lose this income in that financial year. This effect on the NIF will stop once a dedicated levy is introduced from April 2023.

Scenic walk

Looking ahead

The upcoming longer-term Quinquennial Review, which also focuses on the NIF, is due out later this year.

This more in-depth report has a 65-year projection as opposed to the 5-year outlook for the Up-rating report. GAD undertakes this more detailed review every 5 years and it looks at factors such as changes in the age structure of the UK population and changes in state pension age.

PAYadvice.UK 18/1/2022

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