UK pensioners working longer – should they pay National Insurance?

Some people at retirement age decide to drop their tools and abort their keyboard, but for those who choose to continue working for economic reasons or simply a desire to stay in employment, the government is considering collecting NI payments from people over the state pension age who are still in work.

In the UK, people stop paying National Insurance (NI), which is charged at 12%, when they reach state pension age. The state pension age is currently 65 for men and roughly 64 and a half for women.

However, according to the latest Office for National Statistics figures for December 2017 to February 2018, just under 1.2 million people over the age of 65 were in work, which is 10.2% of the entire age group. In Spring 1992 there were just 478,000 in work, 5.5% of the age group, so the proportion in employment has almost doubled since then.

According to plans being considered by the government, pensioners who are still working cold have to pay NI contributions to help fund their care, or for something called ‘citizen’s inheritance’, or to create ‘intergenerational fairness’.

According to a Sunday Times article, the UK government is now looking to remove exemption to help fund the healthcare costs of the nations elderly. This is expected to raise about £12bn per year.

The Resolution Foundation think tank thinks that this group should continue paying NI to help fund a one off £10,000 payment to all 25-year-olds, allowing them to pay for a deposit on a home, start a business or improve their education/skills.

The Intergenerational Commission also released a report supporting levying NI on pension incomes, and they propose a flat rate pension tax relief set at 28% and capping tax-free cash at £40,000. The think tank look to improve the living standards of those in Britain on low-to-middle incomes.

Tom Selby, senior analyst at AJ Bell, said: “Some of the ideas, such as paying £10,000 to everyone over the age of 25, feel like gimmicks that will never see the light of day. Others would face severe practical challenges if they were to be implemented.”

He added: “Ultimately, it is hard to imagine any would-be prime minister campaigning for election on a platform of raising taxes for those over state pension age or hacking back tax-free cash, one of the biggest attractions of saving in a pension.”

So amidst the tax and NI concerns, what is it that UK pensioners are doing for work? According to a study in 2011, 11.8% of over 65’s in England and Wales worked in health and social work, 9.7% in manufacturing, 9.4% in education and 7.8% in professional, scientific and technical jobs.

Although construction work can be physically demanding, 7.7% of those still at work at that age were in construction roles. Overall, 57.3% were employed part time, and 42.7% full time.

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