THE repercussions of the government’s changes to National Insurance for employees has been unravelling since the start of 2024 - and now we must also include the changes made in the spring budget.

In short, millions of British employees nationwide will have noticed a pay rise in their monthly payslip from January onwards.

And following this week’s budget, this will now increase further still from next month.

From the perspective of a financial adviser, it’s my residing hope that these changes will spur those employees to consider how their state - and private pensions - will define their future financial lives.

First, let's place everything that's unravelled recently in context.

Last year, the government announced that 'record national insurance cuts' would arrive on January 6 2024 when the National Insurance Contributions (Reduction in Rates) Bill became law.

Put simply, National Insurance (NI) is a tax paid by those under 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 from 12% to 10% on January 6, 2024, as a direct result of a pledge made Chancellor of the Exchequer, Jeremy Hunt, in last year’s Autumn Statement.

And then, in his Budget earlier this week, [March 6, 2024] Mr Hunt confirmed that a further 2% will be taken off National insurance from April.

In short, the main rate of Class 1 National Insurance Contributions (NICs) paid by employees will have dropped to 8% in the space of 13 weeks.

Those employees previously paying 12% on earnings between £12,570 and £50,270 - also known as Class 1 NICs – will now be paying 8% from April 6, 2024.

The cuts will benefit 27 million workers nationwide with basic rate taxpayers saving £608 on average, while higher-rate taxpayers will save around £1,294 and additional rate taxpayers £1,414.

The self-employed will also be getting tax cuts, but they’ll need to wait until April.

The increased take-home pay that many of these ‘payroll’ employees are now witnessing in their paychecks could undoubtedly help alleviate some of the well-documented price increases linked to the ongoing cost of living crisis.

Given the steep price increases that we’ve all witnessed over the past two years, this is undoubtedly to be welcomed.

Nonetheless, it’s my residing hope that the current changes to NI will galvanize workers in another way...

I hope that they will all take stock of their pensions – both state and private – to ensure that they are planning for the most financially secure future.

Put simply, it's essential to take personal responsibility for the retirement you want.

By understanding and checking your pensions on a regular basis, you’ll have the peace of mind that comes from knowing you’re on track to achieve future financial security.

As a starter for 10, it couldn’t be easier to check your state pension forecast  https://www.gov.uk/check-state-pension

Throughout my career, I’ve seen on many occasions that rules and regulations concerning pensions change with different governments.

For example, the limit on pensions input rose from £40,000 to £60,000 just last year - although there are rules where this allowance can be tapered down due to the level of remuneration to be received.

While these changes are primarily relevant to high-net-worth individuals, they highlight the importance of considering how much you feel you can realistically afford to put into your private pension.

At the start of the 2024/25 fiscal year, the rules on the Pensions Statutory Lifetime Allowance will also commence, bringing with them noteworthy changes in legislation that will affect virtually everyone with a pension in the UK.

Consequently, it’s essential we all check how this legislation will affect us to ensure the rule changes are understood and, if appropriate, acted upon.

And while we're on the topic...

This is also a great time to ensure that you're making the most of your employer pension contributions.

Many employers will commit to matching the amount of money you put into a workplace pension.

If that’s the case for you, it might be worth reviewing this scheme to work out if you can afford to contribute a little bit more than you have been doing, so your employer has to contribute more too, using the saving in NI to increase the amount you are saving.

The ideal retirement scenario is to be in 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.

So, check all your pension details at the earliest opportunity to ensure that you’re on track to achieve this outcome – and don’t be afraid to make fully-informed changes if they’re required.

• If you would like to contact Jillian or another member of the Future Life Wealth Management team, please ring 01246 435996.