How to get the most out of your life insurance retirement plan is one question every retired officer is keen on getting an answer to. National Insurance is a cover for everyone reaching his or her retirement age. You pay money until your retirement age that covers your retirement expenses too. The UK government deducts some amount from your salary each month. Around 90% amount received through National Insurance Contribution goes into a retirement pension.
In 2011, the UK government started the National Insurance Act to give benefits against illness and unemployment. If you are above the age of 16, you can pay contributions. You have to cross the income threshold first. For that, you have to earn a certain amount which is called Lower Earnings Limit. If you are doing a part-time job at a pizza shop and your earnings do not match the required amount, you cannot pay.
Now if you start your payments, you have to continue doing it until you reach the retirement age. If you are working hard at some company or any retail shop, you must be thinking about your contribution and class. The NIC is further divided into classes.
Let’s go through NIC in more detail. Once you know what amount you’ve already paid as a contribution, it would be a good idea to reckon your life insurance retirement plan too.
What is the primary Class 1 National Insurance Contribution?
Mathew is working at a company that provides wedding services. His income is not so good but he is happy because he is living alone and he has no extra expenses.
- His weekly income is more than £183, Mathew has to pay 12% NIC on his income.
- He performed really well and got promoted. Now he is earning more than £962 a week. The rate will drop by 2%.
A few years ago, you had to pay less NIC from your income. In 2016, a single-tier system for state pension was introduced. Now you have to pay a bit higher rate.
While we are talking about employees here. Class 2 National Insurance Contribution and Class 4 National Insurance Contribution are for self-employed.
Class 3 contributions are voluntary. You can make voluntary payments to get retirement benefits.
What are the benefits of National Insurance Contribution?
You feel a bit agitated whenever you receive your paycheck and see the cuts in your income. But they are for your own benefit. You will earn some essential state benefits whenever you get in a bad shape or reach retirement age.
If you are paying taxes and NICs on your income, you have to know what you are getting in return. The payments you make will not go in vain. So, if you are facing bumps in your life, the insurance will rescue you.
Here are some key benefits:
When do I receive Bereavement benefits?
You will receive Bereavement benefits in the following cases:
- If the spouse is deceased and he was making contributions, the widow/widower will get a one-time tax-exempt payment of 2,000 euros.
- The widow/widower will receive an allowance for 52 weeks if above the age of 45.
- The amount of the allowance will depend on the age and the contribution of the person who claims it
- In case, the widow has a child and the child is dependent, the widow will receive the payments until he is eligible for child benefit.
What are the Universal credit benefits?
This benefit is specifically for low-income people. Multiple allowances come under Universal Credit Benefits:
- Employment and Support Allowance
- Income Support and Jobseeker’s Allowance
- Working Tax Credit
- Child Tax Credit
- Housing Benefit
If you think you are eligible for this allowance, you have to apply and wait for a minimum of 6 months to receive the first payment.
Do I receive payments if I am sick?
Statutory Sick Pay (SSP) is designed for these kinds of cases. If you get sick and decide to take leaves for more than 4 days and less than 28 weeks, you can receive payments through SSP from your employer. You will receive this benefit if you were paying your NIC.
What happens after 28 weeks?
After 28 weeks, you will not receive SSP but you may still receive Universal Credit Allowance.
When do I receive a State pension?
Individuals have to reach a certain age to receive a state pension. If you reach the qualifying age, you will start to receive your pension. The payment will depend on your contributions. For example, for how many days did you actually contribute to NIC. How many allowances you received when you were on leave.
What if I don’t qualify?
If you are not qualifying or short of the qualifying years, you can make Class 3 contributions on a voluntary basis.