UK – The UK’s Department for Work and Pensions has released figures showing a 55.8% increase in people paying National Insurance contributions, reflecting the shift of money from Defined Benefit to Defined Contribution pension schemes.
The DWP figures are estimates of the number of people who have paid NI contributions from April 1978 to April 2001. The number paying not-contracted-out contributions increased 55.8% to 14.5m from 9.3m while those contracted out fell to 7.2m from 8.8m (-17.8%).
The National Association of Pension Funds said the shift “came as no surprise” and reflected the switch from DB to DC schemes. The spokesman said the association’s last annual survey of 500 members in November found one in four had closed their final salary scheme.
He added the distribution had changed following the 1988 change in legislation allowing money purchase pension funds. A second key reason for the shift was the rebates given to people contracted out have fallen in real terms over the last five to 10 years. “The rebates have become progressively less of an incentive and in real terms are less valuable.”
The Association of British Insurers and providers, such as Axa, are writing to about 6m people recommending they contract back in to the NI system. Pension funds are also contracting back in. The NAPF said the Scottish & Newcastle DB scheme did this last year.
No comments yet