AS January 2024 concluded, the reality about the government’s recent changes to National Insurance for those employed began revealing themselves…

In short, if you are an employee, you will have noticed an increase in the net line on your monthly payslip.

Put simply, National Insurance (NI) is a tax paid by those under the state pension age to fund state pension benefits and the amount of NI you pay depends on your employment status and how much you earn.

It was reduced on January 6 as a direct result of a pledge made Chancellor of the Exchequer, Jeremy Hunt, in last year’s Autumn Statement.

Speaking at the time, Mr. Hunt made it quite clear that he wanted British residents to see the "benefit" in their salaries from the start of 2024.

Those employees paying 12% of earnings between £12,570 and £50,270 - also known as Class 1 NICs - are now paying 10%, representing a 2% cut.

The cut benefits 27 million workers nationwide with the government estimating that basic rate taxpayers paying 20% will save £304 on average, while higher-rate taxpayers will save £647 and additional rate taxpayers £707.

By way of example, the government has stated that the 2% reduction in NI means that someone earning an average salary of £35,400 will be £450 a year better off.

The increased take-home pay could undoubtedly help alleviate some of the well-documented price increases linked to the ongoing cost of living crisis.

However, another option could be to use this rise in take-home pay to increase your pensions contributions.

With less NI being deducted and paid towards your future state pension provisions and, against the backdrop of the rapid increase in the number of people who're going to be claiming state pension because of the 60’s baby boom, there is now a genuine concern that the date when we will be able to start claiming our state pension will be put back.

The ideal retirement scenario is to be get to a position where you can enjoy one long holiday with your life filled with those hobbies, activities and pursuits that bring you joy, not the longest period of unemployment.

Perhaps this is the time to consider using the National Insurance saving to increase your pension contribution, which may assist in you being able to retire earlier, or bolstering your pension fund at the time you want to retire.

If you would like to understand what benefit you can get from redirecting the National Insurance saving into your pension, please get in touch with myself or another member of the Future Life Wealth Management team at the earliest opportunity on 01246 435996 or by clicking HERE.