Six million UK workers to pay higher NI contributions after pension changes

Following the abolition of the two-tier state pension, around six million UK workers will face a surprise cut in their take-home pay next month.

This is due to a change in the way national insurance contributions are calculated and was announced by George Osborne in the recent Budget, in a bid to move the UK state pension into a “single-tier”.

British employees will be hit with an extra 1.4 per cent national insurance charge on their UK earnings, while employers will typically see a 3.4 per cent rise in NI charges.

Previously, some workers were able to opt out of the UK’s second state pension, thus paying a lower rate of national insurance. However, under the new rules, this option has been abolished.

Osborne hopes that the new technical tax change, which will hit around five million public sector workers and 1.5 million private sector workers, will raise around £5.5 billion per year for the Treasury.

Former Liberal Democrat pensions minister, Steve Webb, said: “I think the chancellor had hoped that no one would notice this rather large tax increase smuggled out in advance as it was some years ago.”