CLASSES OF NATIONAL INSURANCE CONTRIBUTIONS
There are currently five Classes of National
Class 1: Primary Class 1 contributions
are paid by employees whose earnings reach or exceed the Lower
Earnings Limit£66 per week from April 1999. Employees
do not pay contributions on earnings above the Upper Earnings
Limit£500 per week from April 1999.
Primary Class 1 contributions provide cover
for the full range of contributory social security benefits. Employees
who are contracted-out of SERPS (i.e., members of Contracted Out
Salary-Related or Contracted-Out Money Purchase occupational pension
scheme) pay reduced ("rebated") rates of contributions
Secondary Class 1 contributions are paid by employers on
the portion of each employee's earnings that exceed the Earnings
Threshold£83 per week from April 1999. There is
no Upper Earnings Limit for secondary Class 1 contributions. Employers
of employees who are contracted-out of SERPS (i.e., members of
Contracted-Out Salary-Related or Contracted-Out Money Purchase
occupational pension scheme) pay reduced ("rebated")
rates of contributions. Where secondary Class 1 contributions
are payable in respect of seafarers ("mariners" in Social
security legislation) employed on a foreign-going ship,
the percentage rate of those contributions is reduced by 0.5 per
cent. This reduction recognises the need for the provision of
medical services on board such ships in the absence of access
to the services of the NHS.
Classes 1A: paid by employers only and assessed
on the cash equivalent of the benefit of cars and car fuel they
provide to their employees for private use.
Class 2: weekly flat-rate contributions (£6.55
per week from April 1999) paid by all self-employed people
unless they have been granted a Small Earnings Exception (SEE)
because their profits are expected to fall below a prescribed
level£3,770 for 1999-2000broadly equivalent
to the annual Lower Earnings Limit for primary Class 1 contributions.
Class 2 contributions provide cover for all contributory benefits
except contributions based Jobseeker's Allowance and SERPS.
Class 3: voluntary flat-rate contributions (£6.25
per week from April 1999-00) paid by non-employed people and
others with a deficient contribution record to help qualify for
basic retirement pension and widows' benefits.
Class 4: profits related contributions paid
by self-employed people at the rate of 6 per cent of profits between
the Lower Profits Limit and Upper Profits Limit (£7,530
and £26,000 respectively for 1999-2000. Class 4 contributions
do not provide benefit cover. They are a redistributive device
designed to share the costs of benefits available to the self-employed
in a more equitable way.
85 A "foreign-going ship" is a ship or vessel
employed in trading or going outside the following limits-the
United Kingdom, the Republic of Ireland, the Channel Islands,
the Isle of Man and the continent of Europe between the river
Elbe and Brest inclusive; and every fishing vessel proceeding
south beyond Latitude 48°30'N, west beyond Longitude 12°W
and north beyond Latitude 61°N. Back