Annex A
NATIONAL INSURANCE CREDITS
1. People who are normally liable for National
Insurance contributions but who are temporarily not working due
to a specified contingency, eg they are unemployed and available
for work or incapable of work due to sickness, may be eligible
for credited contributions to assist them to maintain their insurance
record during these periods. Credits are not sufficient by themselves
to earn entitlement to social security contributory benefits.
It is necessary for some contributions to have been paid during
the relevant tax years on which a benefit claim is based.
2. A list of some of the contingencies for
which credits may be awarded follows:
— Starting credits—for
the tax year in which age 16 is reached and for each of the two
following tax years to the level required to make those years
reckonable for pension purposes.
— Approved training—for
each week during any part of which a person was undergoing a course
of full-time training or a course of training introductory to
such a course provided that the course was not intended to continue
for more than 12 months. The person must have attained the age
of 18. More flexible conditions apply to disabled people.
— Unemployment—for each
week for the whole of which a person is in receipt of Jobseeker's
Allowance or satisfies certain conditions set down in Section
1(2) of the Jobseekers Act 1995. These include that s/he is available
for, capable of, and actively seeking remunerative work. It is
also possible to award unemployment credits, where required, to
persons in receipt of certain compensatory payments following
dismissal from employment.
— Incapacity—for each
week in which each of the days was a day of incapacity for work
within the terms of the legislation or was a week in which
an unemployability supplement or allowance was payable.
— Jury service—for each
week for any part of which a person attended at Court for jury
service provided that, if he was employed, his earnings that week
were below the LEL.
— Maternity—for each week
during a Maternity Allowance period for which benefit was paid.
Employees in receipt of Statutory Maternity Pay may apply for
credits if they have a deficient NI record for the contribution
year(s) in which SMP was paid.
— Termination of full-time education,
training or apprenticeship—for the purposes of entitlement
to unemployment and incapacity benefits only—for either
one of the last two complete tax years before the beginning of
the relevant benefit year if during any part of that year, the
claimant was undergoing a course of full-time education, training
or other full-time occupational/vocational course or was an apprentice.
The course or apprenticeship must have terminated at the time
the claim was made and must have commenced before the claimant
was 21. More flexible conditions apply to disabled people.
— Family Credit recipients—for
the purposes of entitlement to a Category A or a Category B Retirement
Pension, a Widowed Mother's Allowance or a Widow's Pension, where
Family Credit is paid for any week in respect of an employed earner
or a self-employed earner who has been excepted from liability
to pay Class 2 contributions on the ground of small earnings,
that person shall be credited with earnings equal to the lower
earnings level in respect of that week. This only applies where
a person attains pension age after 5 April 1999 and in respect
of weeks falling wholly or partly in the 1995/96 and subsequent
tax years. Where a married/unmarried couple are involved, regulations
set out who is entitled to the credit. The total of earnings and
FC counts for SERPS.
— Disability Working Allowance Credits
—recipients of Disability Working Allowance receive Class
1 credits. Total of earnings + DWA counts for SERPS.
HOME RESPONSIBILITIES
PROTECTION
3. Home Responsibilities Protection was
introduced as part of the New Pension Scheme in 1978. It is designed
to protect the basic state Retirement Pension and Widow's Benefit
position of certain categories of men and women who stay at home
because of caring responsibilities. It is also available to those
carers who may do some work but whose earnings are insufficient
to achieve a qualifying year for basic state retirement pension
purposes.
4. The working life of an individual is
the number of years from the start of the tax year in which they
enter the National Insurance system (usually the year they reach
age 16) to the end of the tax year before the one in which they
reach pensionable age. The working life of men is usually 49 years
and for women 44 years. The working life of the individual is
reduced by the number of years of relevant home responsibilities
up to a maximum of 20 years reduction.
NUMBERS RECEIVING
CREDITS
5. In each year between 1987-88 and 1995-96
over 55 per cent of people with National Insurance Credits recorded
had 52 or more weeks awarded. In most years, 11 per cent to 12
per cent have less than nine weeks awarded.
6. When Home Responsibilities Protection
was introduced in 1978-79 the number of people with Home Responsibilities
Protection recorded was 4.9 million. This decreased to a low of
4.7 million in 1986-87 and has since increased year on year to
5.3 million in 1995-6.
VOLUNTARY CONTRIBUTIONS
7. Voluntary contributions are helpful to
the wider objective of enabling people to build up pension entitlements.
It is impossible to know exactly how many people will pay Class
3 with respect to the current year. This is because of the long
time lag—generally up to the end of the sixth year following
the year for which the contributions are paid—that arises
in practice between the year in question and the payment of the
contributions. For example, voluntary contribution payments for
1998-99 will still be arriving in 2005.
Assuming that everything else is equal, between
250,000 and 275,000 people will pay Class 3 in respect the current
tax year. Fewer than 100,000, however, are likely to do so before
the end of that tax year, with most paying later (eg following
a NI "Deficiency Notice"[1]).
8. Class 3 contributors tend to be in the
upper age ranges, peaking at age 59. There is a sharp drop in
the number of male contributors between ages 60 and 64, due to
the availability of autocredits to that group. Some 50,000 people
abroad pay Class 3 each year. It is not possible to tell how many
of these are temporarily out of the country and how many are expatriates
living permanently abroad. Mostly contributors opt to pay
Class 3 for either an entire tax year or—less usually—for
just a handful of weeks. Current receipts from Class 3 contributions
are estimated at £60 million pa.
AUTOCREDITS
9. Since 1983, autocredits have been
awarded automatically to people for the tax year in which they
reach age 60 and for each of the four succeeding tax years to
the extent necessary to make each year a reckonable one for contributory
benefits. This provision was introduced to remove the necessity
for the many men who retired at age 60 to attend the Employment
Service Jobcentre and declare their availability for work when,
in practice, few had any real intention of resuming employment.
Autocredits are not available for any tax year in which the individual
is abroad for more than 182 days. Around 1.3 million people received
autocredits during 1995-96.
1 A "Deficiency Notice" is produced some
18 months after the end of the tax year to notify contributors
of any shortfall in the contribution record and to advise what
further action may be taken. This will include a calculation of
the amount of Class 3 payable to make the tax year in question
a qualifying year for RP purposes. Not all contributors, however,
receive Deficiency Notices. Back
|
