GMB Experts in the World of Work
Join GMB today
 Follow @GMB_union

£5.1 Billion NI Stealth Tax

Tuesday, September 22, 2015

Stealth Tax Bombshell Raising £5.1 Billion Per Year From April 2016 To Hit 6 Million Workers In Employer Defined Benefit Pension Schemes

This huge tax rise will have a deflationary impact on the economy at a time when the first ripples in the downturn in world trade are beginning to be felt across the UK economy  says GMB.

When the new state pension is introduced in April 2016 the National Insurance contracted-out rebate of 1.4% for 6 million workers in 2,500 employer defined benefits pension schemes will cease.

The standard rate of 12% for National Insurance is applied to earnings between the Primary Threshold and the Upper Accruals Point (£155 per week or £5,824 per year and £770 per week or £40,040 per year respectively in 2015-16). For contracted out employees the rate is 10.6% for 2015-16. From April 2016 the rate will be 12% for all workers.

For the estimated 6 million scheme members affected and the extra national insurance will be 1.4% of earnings between the lower and upper earnings limits (£5,824-£40,040) which works out as -

SALARY                     EXTRA NATIONAL INSURANCE PER YEAR

£15,000                                   £128

£25,000                                   £268

£35,000                                   £408

Brian Strutton, GMB National Secretary, said "As part of the changes to the state pension, the government is ending the arrangement whereby good quality pension schemes could opt out of the additional state pension (SERPS) and the scheme members could pay lower national insurance contributions.

This extra tax on 6 million working people will come as a very nasty shock. With inflation and pay rises at historically low levels workers could well see their pay rise next year wiped out by extra national insurance.

The extra revenue to the Treasury amounts to £5.1billion per annum according the HM Treasury. This is huge tax rise and will have a deflationary impact on the economy at a time when the first ripples in the downturn in world trade are beginning to be felt across the UK economy.

Government is raising an additional £3.3 billion from the public service pay bill of £175 billion including central government, local government and education staff. GMB is calling on all employers including HM Government to take this into account when negotiating pay rises to minimise the deflationary impact of this stealth tax.”

End

Contact: Brian Strutton 07860 606 137 or Keir Greenway 0207 391 6700 or GMB press office 07974 252 823 or 07921 289880

Share this page
+1