In the Budget, the Chancellor confirmed that the single-tier state pension of around £144 a week will be introduced in April 2016, rather than in April 2017. This brings forward the abolition of members of DB pension schemes contracting out of the state second pension.
This means that contracted-out DB scheme members and their sponsors will have to pay higher National Insurance Contributions from an earlier stage. To alleviate the impact on employers, the Government has committed to legislating for a statutory override, which will allow private sectors employers to cover the costs of additional employer NICs through changes to contribution rates or pension benefits.
The Chancellor intends to use additional employee NICs to create an ‘employment allowance’ of £2,000 for each business and charity and additional employer NICs to help cover the costs of social care reform. This includes the cap of £72,000 on reasonable care costs due to be introduced from April 2016.