National Insurance Contributions Research Articles

Understanding IR35 tax regulation and off-payroll working

Emma Rawson explains the rules surrounding tax and National Insurance contributions for staff not directly employed by the care home and how to remain compliant.

Working More Years In Spain Has to Start from a Young Age: Lessons from the Labour Market Exit of People Aged from 50 to 65 in the Last Decade

Since 2013, retirement age in Spain has been rising slowly from 65 to an expected 67 in 2027 and, with it, the minimum number of years of National Insurance contributions from 35 to 38. This policy is justified by sustainability of the social security system since the number of older people is increasing faster than the number of contributors. However, the policy has been criticised for not taking into account the diversity of working lives. The labour market and social construction of work differ with occupations and with gender, thus creating pluralities of working lives. Hence, the ways of leaving the labour market should take this diversity into account. Since the present wholesale policy of equally postponing retirement age for everyone overlooks the actual state of retirements, the aim of this study is to ascertain who has retired earlier or later in the last decade, the causes of exits from the labour market, and the repercussions on the number of years of National Insurance contributions. Premature exits from the labour market of people aged between 50 and 65 during the decade from 2010 to 2020 are analysed using data from the Continuous Sample of Working Lives (CSWL) taken from Spanish Social Security records. These are people who were born between 1945 and 1954. The results show that women work later than men, that people in Routine occupations tend to leave the labour market early, and that the number of years worked between the ages of 50 and 59 are a good predictor of prolongation of working life after the age of 60, although there are differences between the sexes.

The employment implications and tax status of English football referees: Commissioners for HM Revenue and Customs v Professional Game Match Officials Ltd [2021] EWCA Civ 1370

In September 2021, the Court of Appeal in England and Wales delivered its judgment in the case of Commissioners for HM Revenue and Customs v Professional Game Match Officials [2021] EWCA Civ 1370 (hereafter PGMOL). The case concerned the employment status of referees who officiate in the men's professional game. The First-Tier Tribunal of the Tax and Chancery Chamber (FTT) had allowed PGMOL's appeal against the Revenue's determination that a certain class of part-time referees were the employees of PGMOL under s. 4(1) of the Income Tax (Earnings and Pensions) Act 2003, and that income tax and employer's national insurance contributions should be deducted from the payments that PGMOL made to them in 2013–2016. On the Revenue's appeal, the Upper Tribunal (UT) upheld the FTT's decision on 6 May 2020. The Revenue further appealed.

DETERMINAN KEMAUAN MEMBAYAR (WILLINGNESS TO PAY) IURAN JAMINAN KESEHATAN NASIONAL PADA PESERTA MANDIRI DI KOTA JAMBI TAHUN 2021

This study aims to determine the determinants of willingness to pay national health insurance contributions to independent participants in Jambi City. This study uses a quantitative method with a cross sectional design. The population is all participants of the National Health Insurance (JKN) in 3 sub-districts (East Jambi District, Jambi Market and Jelutung) namely 42,592 participants. The sampling technique used was purposive sampling. The results of this study indicate that there is a relationship between, income, perception of illness and ability to pay contributions with willingness to pay contributions, and there is no relationship between education and the number of family members with willingness to pay contributions.

Comparing the Fiscal Consequences of Controlled and Uncontrolled Osteoarthritis Pain Applying a UK Public Economic Perspective.

Background: Individuals experiencing osteoarthritis (OA) pain can pose significant costs for governments due to reduced work activity in these individuals and increasing reliance on public support benefits. In this analysis we capture the broader economic impact of OA pain by applying a government perspective, public economic framework to assess controlled and uncontrolled pain.Methods: We used a Markov model to compare labour market participation in people with uncontrolled OA hip or knee pain compared to a cohort with controlled OA pain. The likelihood of employment, long-term sickness, disability, and early retirement in those with controlled pain used publicly available UK data. The relative effect of uncontrolled OA pain on fiscal outcomes is drawn from peer reviewed publications reporting reduced work activity and reliance on public benefits for people with uncontrolled OA pain. Lost tax revenue was derived using UK tax rates and national insurance contributions applied to annual earnings. Social benefit rules were applied to calculate government financial support to individuals. Health-care costs were calculated based on estimates from an UK observational study. The base case analysis compared the projected lost tax revenue and transfer payments for a 50-year-old cohort with severe OA pain, retiring at age 65.Results: For a 50-year-old individual with moderate uncontrolled OA pain with 15-years remaining work expectancy, the model estimated a £62 383 reduction in employment earnings, a £24 307 reduction in tax contributions and a need for £16 034 in government benefits, compared to a person with controlled OA pain. In people with severe uncontrolled OA pain incremental foregone earnings were estimated to be £126 384, £44 925 were not paid through taxation and £25 829 were received in public benefits, compared to the controlled pain cohort. Health-care costs represented 13% and 12% of all OA-related fiscal cost in the moderate uncontrolled OA pain and severe uncontrolled OA pain comparison, respectively.Conclusions: For governments, maintaining an active workforce is paramount to maintaining economic growth and reducing spending on government programs. The approach described here can be used to augment cost-effectiveness models to inform a range of stakeholders of benefits attributed to controlled OA pain.

Comparing the Fiscal Consequences of Controlled and Uncontrolled Osteoarthritis Pain Applying a UK Public Economic Perspective

Background: Individuals experiencing osteoarthritis (OA) pain can pose significant costs for governments due to reduced work activity in these individuals and increasing reliance on public support benefits. In this analysis we capture the broader economic impact of OA pain by applying a government perspective, public economic framework to assess controlled and uncontrolled pain. Methods: We used a Markov model to compare labour market participation in people with uncontrolled OA hip or knee pain compared to a cohort with controlled OA pain. The likelihood of employment, long-term sickness, disability, and early retirement in those with controlled pain used publicly available UK data. The relative effect of uncontrolled OA pain on fiscal outcomes is drawn from peer reviewed publications reporting reduced work activity and reliance on public benefits for people with uncontrolled OA pain. Lost tax revenue was derived using UK tax rates and national insurance contributions applied to annual earnings. Social benefit rules were applied to calculate government financial support to individuals. Health-care costs were calculated based on estimates from an UK observational study. The base case analysis compared the projected lost tax revenue and transfer payments for a 50-year-old cohort with severe OA pain, retiring at age 65. Results: For a 50-year-old individual with moderate uncontrolled OA pain with 15-years remaining work expectancy, the model estimated a £62 383 reduction in employment earnings, a £24 307 reduction in tax contributions and a need for £16 034 in government benefits, compared to a person with controlled OA pain. In people with severe uncontrolled OA pain incremental foregone earnings were estimated to be £126 384, £44 925 were not paid through taxation and £25 829 were received in public benefits, compared to the controlled pain cohort. Health-care costs represented 13% and 12% of all OA-related fiscal cost in the moderate uncontrolled OA pain and severe uncontrolled OA pain comparison, respectively. Conclusions: For governments, maintaining an active workforce is paramount to maintaining economic growth and reducing spending on government programs. The approach described here can be used to augment cost-effectiveness models to inform a range of stakeholders of benefits attributed to controlled OA pain.

Being Your Own Boss: Should the Government Care?

Self-employed workers have lost out during the pandemic, and state assistance has been poorly targeted, with over half of the self-employed receiving no help.The Chancellor has hinted that, in return for government assistance, the self-employed may be taxed more heavily in the future. The tax authorities have long been concerned that the self-employed do not pay enough income tax and national insurance contributions. Thus, the conditions for obtaining self-employment status have already been considerably tightened. Conversely, trade unions have argued that the self-employed are a disadvantaged group, which misses out on many welfare benefits and employment rights. These two approaches suggest a pincer movement towards giving the self-employed greater entitlements but at the cost of greater taxation and tighter regulation. The self-employed are an extremely heterogeneous group. The danger is that new one-size-fits-all legislation will deter many from entering self-employment and drive activities into the informal economy. There are no strong public policy grounds for subsidising self-employment, but there are no grounds for deterring it either. In the current climate, it could be unwise to penalise the self-employed unnecessarily. Changes to their status could take place in the context of a long-overdue merger between national insurance and income tax, which could enable the public to see clearly how much the government takes from their pay.

National Insurance Contributions on termination payments

National Insurance Contributions on termination payments

The effect of income-based policies on mortality inequalities in Scotland: a modelling study

The unequal distribution of income is a fundamental determinant of health inequalities. Decision making around economic policies could be enhanced by showing their potential health effects. We used scenario modelling to assess the effects of 12 income-based policies on years of life lost (YLL) and inequalities in YLL in Scotland for the 2017-21 period. In this modelling study, we used EUROMOD version H1.0+, a tax-benefit microsimulation model, to estimate the effects of hypothetical fiscal policies on household income for Scottish households in the 2014/15 Family Resources Survey (n=2871). The effects were modelled excluding housing costs. Income change from baseline was estimated for each quintile of the 2016 Scottish Index of Multiple Deprivation (SIMD) after weighting to account for differential non-response to the Family Resources Survey, and incomes were equivalised according to the Organisation for Economic Co-operation and Development's modified equivalence scale. A regression analysis of cross-sectional data was used to estimate the relationship between income change and all-cause mortality, followed up by a sensitivity analysis to account for uncertainties around the assumptions on effect size. Informing Interventions to reduce health Inequalities (Triple I), a health inequalities scenario modelling tool, was used to estimate policy effects on YLL and government spending after five years of theoretical implementation. The Triple I model used population estimates for 2016 stratified by sex, 5-year age group, and SIMD quintile, which were obtained from the National Records of Scotland. Preliminary estimates of relative policy costs were calculated from the EUROMOD-derived combined effects of each policy on tax bills, National Insurance contributions, and benefits receipts for Scottish households. Taxation-based policies did not substantially affect household incomes, whereas benefits-based policies had large effects across the quintiles. The best policy for improving health and narrowing health inequalities was a 50% increase to means-tested benefits (approximately 105 177 [4·7%] YLL fewer than the baseline of 2·2 million, and a 7·9% reduction in relative index of inequality). Effects on YLL and health inequalities were inversely correlated in response to changes in taxation policy. Citizen's Basic Income (CBI) schemes also substantially narrowed inequalities (3·7% relative index of inequality for basic scheme, 5·9% for CBI with additional payments for individuals with disability), and modestly reduced YLL (0·7% for the basic scheme and 1·4% with additional payments). The estimated government spending associated with a policy was proportional to its effect on YLL, but less closely related to its effect on inequalities in YLL. Policies that affect incomes could potentially have marked effects on health and health inequalities in Scotland. Our projections suggest that the most effective policies for reducing health inequalities appeared to be those that disproportionately increased incomes in the most deprived areas. Although modelling was subject to various assumptions, the approach can be useful to inform decisions around addressing the upstream determinants of health inequalities. None.

Protocol for a multi-centre, definitive randomised controlled trial of the effectiveness of Individual Placement and Support for employment support among people with alcohol and drug dependence

BackgroundUnemployment is highly prevalent in populations with alcohol and drug dependence and the employment support offered in addiction-treatment programmes is ineffective. Individual Placement and Support (IPS) is an evidence-based intervention for competitive employment. IPS has been extensively studied in severe mental illness and physical disabilities, but there have been no formal randomised controlled trials (RCTs) in alcohol and drug dependence. The Individual Placement and Support for Alcohol and Drug Dependence (IPS-AD) study should determine whether IPS for patients with alcohol use disorder (AUD), opioid use disorder (OUD) and other drug use disorder is effective.Design/methodsThe IPS-AD study is a seven-site, pragmatic, two-arm, parallel-group, superiority RCT. IPS-AD includes a realist process evaluation. Eligible patients (adult, unemployed or economically inactive for at least 6 months and wishing to obtain open job market employment and enrolled in ongoing community treatment-as-usual (TAU; the control condition) in England for AUD, OUD and other drug use disorders) will be randomised (1:1) to receive TAU and any standard employment support, or TAU plus IPS (the experimental condition) for 9 months with up to 4 months of in-work support. The primary outcome measure will be competitive employment status (at least 1 day (7 h)) during an 18-month follow-up, determined by patient-level, trial-data-linkage with national tax and state benefit databases. From meta-analysis, an 18% target difference on this measure of vocational effectiveness (for the experimental intervention) and a two-sided 5% level of statistical significance, will require a minimum target sample of 832 participants to achieve 90% power for a pre-registered, mixed-effects, multi-variable logistic regression model. A maximum-likelihood multiple-imputation approach will manage missing outcome data. IPS-AD has six vocational secondary outcome measures during the 18-month follow-up: (1) total time in competitive employment (and corresponding National Insurance contributions and tax paid); (2) time from randomisation to first competitive employment; (3) number of competitive job appointments; (4) job tenure (length of longest held competitive employment); (5) sustained employment (tenure in a single appointment for at least 13 weeks); and (6) job search self-efficacy. A primary cost-benefit analysis and a secondary cost-effectiveness analysis will be done using the primary outcome and secondary vocational outcomes, respectively and will include addiction treatment and social and health outcomes and their associated reference costs. The process evaluation will address IPS implementation and delivery.DiscussionThe IPS-AD study is the first large-scale, multi-site, definitive, superiority RCT of IPS for people with alcohol and drug dependence. Findings from the study will have substantial implications for service delivery.Trial registrationISRCTN Registry, ID: ISRCTN24159790. Registered on 1 February 2018.

PNS198 PHARMACY COST OF PREVENTING ADVERSE DRUG EVENTS BY PHARMACISTS' INTERVENTIONS ON PRESCRIBING ERRORS

Adverse drug events (ADEs) are injuries resulting from medical intervention related to a drug, causing morbidity and mortality in the population and generating substantial health care costs. Prescribing errors contribute to a large preventable portion of ADE. The aim of this study was to estimate the pharmacy cost of preventing ADE through pharmacist interventions on prescribing errors. Data was collected in 42 Norwegian pharmacies over 4 consecutive weeks in April 2016. The data was analyzed in terms of prescribing errors, interventions performed and time to resolve the issues. Cost was estimated based on average pharmacist salary and national insurance contributions for 2016. Sensitivity analysis was done on the cost estimate using minimum and maximum pharmacist salary for 2016. The sample comprised 39,750 dispensing processes of 71,833 items. 2822 prescribing errors were captured in 2545 dispensing processes of 6080 items, giving a rate of prescribing errors of 7.1%. The most frequent errors were adverse drug reactions (n=563, 20%), drug-drug interactions (n=560, 19.8%), dose errors (n=289, 10.2%). Other errors included amount/duration, drug choice, formulation and strength. 5279 interventions were done to resolve the issues, giving 1.9 interventions per prescribing error. The most frequent interventions were dialogue with patient (n=2073, 73.5%), pharmacist’s judgement (n=1222, 43.3%), reviewing patient profile (n=625, 22.1%) and contacting prescriber (n=482, 17%). Time spent on resolving prescribing errors was 12,684 minutes, of which 3,318 minutes were spent calling the prescriber. The resulting pharmacy cost estimate was USD 0.14 per prescription. With a total of 53,223,641 prescriptions dispensed annually, this equals USD 7,432,000 in 2016 (sensitivity analysis USD 0.12-0.17 per prescription, USD 6,395,000-9,150,000 per year). The costs to pharmacies for interventions directed to handle prescribing errors were USD 0.14 per prescription considering only the personnel costs.

Social protection for the self-employed in the UK: the disappearing contributions increase

A recent government proposal to increase national insurance contributions for the self-employed in the UK, in return for improved pensions and potentially also parental benefits, was immediately reversed. This article analyses the reasons behind this about-turn, linking them to tensions between the goals of thwarting ‘bogus’ self-employment and increasing tax revenues versus commitment to a higher wage, lower tax, lower welfare economy. The analysis is set in the context of the singularity of the UK system in relation to much social protection in continental Europe, and wider debates about the roles of individual, state and labour market in providing security.

Analysis of the Effect of the Elderly's Labor Status on Care Cost at the End of Life.

This study quantitatively analyzes the effects of employment patterns at the time of death of the elderly on the utilization of medical care before death using the cohort data from the National Health Insurance Corporation, controlling mortality to obtain more accurate results. Gender was coded as 0 for males and 1 for females, and average monthly household income was taken as a logarithm to approximate a normal distribution. Care cost at the end of life was defined as the sum of the national health insurance contributions and statutory self-contributions. To measure proximity to death, deceased elderly were divided by the period from last hospital visit to death (except any hospital visit at time of death). We distinguished regular workers, irregular workers, self-employed and employers, unpaid family workers, and unemployed. The data used in this study are sample cohort data from the National Health Insurance Corporation. We examined the relationships between variables through 4 models using negative binomial regression. The effects of employment status on health status were analyzed and adjusted for demographic characteristics, socioeconomic status, and proximity to death. As the dependent variable, medical expenses were taken for 1 year before death. In this study, care costs at end of life were higher when children were economically independent and when the respondent was more educated, had high economic level, and had high average monthly household income. In addition, employment security also had a significant impact on care cost at end of life: Irregular workers spent significantly less than regular workers. The fact that care cost at end of life is differentiated according to employment status suggests that individuals’ health exists within a social context, which may also constrain it: There is a risk that people’s health status will become determined by socioeconomic status.

Pension Schemes, Taxation and Stakeholder Wealth: The USS Rule Changes

Although tax relief on pensions is a controversial area of government expenditure, this is the first study of the tax effects of a real world defined benefit pension scheme - the Universities Superannuation Scheme (USS). First, we estimate the tax and national insurance contribution (NIC) effects of the rule changes in 2011 on the gross and net wealth of the sponsor, government, and 16 age cohorts of members, deferred pensioners and pensioners. Second, we measure the size of the twelve income tax and NIC payments and reliefs for members and the sponsor, both before and after the rule changes. We find the total subsidy split is roughly: 40% income tax subsidy; 30% member' NIC subsidy; and 30% sponsor NIC subsidy. However government proposals for reform have concentrated exclusively on the income tax relief, neglecting the substantially larger NIC relief, possibly because they have overestimated the size of the income tax relief.

The Incidence of Social Security Contributions in the United Kingdom: Evidence from Discontinuities at Contribution Ceilings

This paper investigates the incidence of National Insurance contributions (NICs) in the UK, exploiting the ceiling that applied to employee and employer contributions between 1975 and 1985 and to employee contributions only between 1986 and 2007. Using data from the New Earnings Survey Panel Dataset, a mandatory survey of British employers’ payroll records, we show there was no dip in the earnings density at the ceiling in either period, suggesting that the earnings of those near the ceiling were unresponsive to the change in tax rates. The absence of such a dip allows us to test which of labour cost, gross earnings or net earnings are smooth around the threshold. As shown by Alvaredo et al. (De Econ, 2017. doi:10.1007/s10645-017-9294-7), this is informative about the incidence of the change in tax rates at the threshold on those located nearby. We cannot reject the hypothesis that it is gross earnings that are smooth around the threshold, which may reflect a substantive role for statutory incidence in determining economic incidence. However, a lack of statistical power means that, while in some cases we can reject the hypotheses that the full economic incidence of NICs are borne by one side of the market, our results taken alone are also consistent with a wide range of less extreme incidence shares.

Community pharmacists will not need to pay enhanced national insurance contributions

Community pharmacists will not need to pay enhanced national insurance contributions

Autumn Statement Briefing 2015

Government spending: The government’s Spending Review will be far from comprehensive. With the triple-lock for state pension increases and NHS, per-pupil funding for schools, international aid and the defence budget all protected, the overwhelming majority of government spending has been ring-fenced from cuts. Rather than salami-slicing remaining departmental budgets to hit arbitrary savings targets, the government should rethink its functions from first principles. The spending review should take account of changing demand patterns and relative prices in certain sectors and should not maintain arbitrary targets for spending as a percentage of national income in others. It should take into account the long-term effects of ageing on health and pensions spending. Capital spending decisions should prioritise projects with the highest economic return. The tax credits fiasco: The government’s proposed tax credit changes should be abandoned. They significantly increase marginal tax rates for the low-paid. Delaying implementation or other minor changes to the reforms will not change this. Instead, the government should overhaul the system. It should replace tax credits with a negative income tax based on household income with the amount of tax-free income based on tax allowances which would be transferable within households. This would end the discrimination against family formation inherent within the current system. Consideration should be given to increasing the conditionality of benefits with more stringent work requirements. The tax system: The Autumn Statement should make plans to simplify the tax system and make it more economically rational. The government should not put forward changes to the system of pension tax relief except that the tax-free lump sum should be abolished or severely restricted. Property taxation should be completely overhauled, with the long-term aim of abolishing council tax, business rates and stamp duty, and replacing them with a Land Value Tax on commercial land and a tax on imputed rent for residential property. Personal tax thresholds should rise by the higher of inflation or earnings growth in the coming years after a number of years of under-indexation. Further increases in tax thresholds at the lower end should focus on raising the starting threshold for national insurance contributions. The withdrawal of the personal allowance above £100,000 should be abolished as should the higher rate of income tax. The VAT base should be broadened to include VAT at the full rate on domestic energy consumption. Other extensions of the VAT base should be implemented in the long run. This change and the restricting of the tax-free lump sum for pensions would facilitate all the tax reductions above plus a number of measures that would considerably simplify the tax system. Decentralisation: The government should be ambitious in its fiscal decentralisation agenda. But rather than ad-hoc City Deals powers for spending, revenue raising and regulation should be devolved to all local authorities.

Koordynacja zabezpieczenia społecznego w Unii Europejskiej

The topic of the paper refers to the most crucial issues related to the coordination of social security in EU and the regulations of the European Union law related to the national insurance contributions. The EU law determines fundamental principles for the coordination of social security in EU, which include a warranty for the protection of rights related to persons moving between the European Union Member States. The principles of the coordination of social security have normative nature, i.e. they are included in the European Union system of legal provisions. The most important principles are: the principle of equal treatment, the principle of the application of single legislation, the principle of counteracting a cumulation of benefits (proportionality), the principle of priority in the case of converging rights to benefits. The European Union legal regulations related to the national insurance contributions do not replace the national legislation but only supplement it at the level of the Community so as to ensure a closer cooperation between the institutions, which handle social security.

Merging National Insurance Contributions and Income Tax: Lessons of History

AbstractThis paper is a response to the British Chancellor of the Exchequer's consultation on closer integration of the operation of National Insurance contributions and income tax. Our historical research on proposals for a complete merger of the two systems enables people interested in tax reform to draw on experience and ideas of officials who grappled with issues similar to those facing us today. We show that officials identified the problem of maintaining increasing numbers of elderly people as long ago as 1950, and identify when and why the British government adopted a pay‐as‐you‐go basis for the National Insurance Fund. We conclude that the advantages of National Insurance contributions separate from income tax are not negligible, but that a merger would be fairer than the present system. Our principal concern is that the contributory principle may raise unrealistic expectations regarding state pensions as it encourages a mistaken belief that these are paid from contributions made by pensioners in the past. We therefore recommend that the government should produce an annual statement showing how state pension liabilities are to be met.

Growing the UK Pension Pot: The Case for Privatisation

The system of contracting out of state pensions – a form of pension privatisation – operated very successfully in the UK until recent years with cross-party support. This was very important in ensuring that the UK system of private pension provision was one of the most successful in the Western world. This paper proposes reviving the concept of voluntary pension privatisation through contracting out using the proposed reformed UK pension system that will be introduced from 2016. Under the proposals, individuals would receive rebates of national insurance contributions equal to the fair actuarial value of the pension that they will forego as a result of opting out of half the state pension. The rebates will be paid to somebody contracting out regardless of whether that individual pays sufficient cash national insurance contributions: the rebates are designed to reflect the actuarial value of the pension foregone. They will vary with age and be available to low earners and those who are receiving state pension entitlement as a result of undertaking caring responsibilities. Such people will be able to build up considerable pension assets in their own right. In the context of widespread discussion about the inequalities arising from returns on capital being higher than economic growth, this might be regarded as especially important. Currently, large numbers of people are discouraged from accumulating capital because the main objectives of saving are fulfilled by the state pension schemes. If the state pension is linked to earnings, the rebate would be around £3,000 per year for a 40-year-old. This seems high, but it is a reflection of the very high cost of the state promising earnings-related pensions as it does currently. The rebate would be saved in a defined contribution vehicle and the government’s low-cost National Employment Savings Trust (NEST) scheme would be available as a savings vehicle. If the state pension were linked to prices, the rebate would be around £1,500 for a 40-year-old. The rebates will change as mortality and interest rates change and be set according to objective criteria. They would be challengeable in the courts to prevent the erosion of rebates as happened under the previous contracting out scheme. If 10 million people decided to contract out, rebates might total between £15 billion and £30 billion. The government has, in fact, paid national insurance rebates of £10 billion until quite recently. Although this cost may seem high, it is merely bringing forward the cost of government pension promises to the time at which the promises are made. It would be reasonable for the government to borrow to finance the payment of rebates if necessary (or run lower budget surpluses) given that, when people contract out of the state pension, it lowers future pension liabilities. This reform can be seen as a first step to a more comprehensive plan of pension privatisation. The reform proposed in this paper would revive – in a more robust form – the policy of UK governments which, until, recently, was to promote private pension provision as an alternative to state provision. It is particularly important given that the coalition government is now in the process of abolishing contracting-out from state pensions. Largely due to the system of contracting out developed after the war more than 5.5 million workers (nearly one-quarter of the workforce) had personal pension plans by 1995, while many more were members of occupational pension schemes. Overall, the number of people contracted out of the state earnings related pension scheme (SERPs) reached 13.8 million by 1994/95. The ratio of people contracted out of SERPs to SERPs’ members peaked at over 2:1 in 1992/93. Partly because of this policy the value of pension fund assets in the UK is equal to 73 per cent of GDP. In contrast, in large parts of continental Europe private pension fund assets are almost non-existent: in France, Italy, Spain and Greece, as well as in Austria, Germany, Sweden and Norway, they account for less than 10 per cent of GDP. However, contracting out declined in the twenty-first century. By 2011, only 1.6 million people were contracted out through private sector defined benefit schemes. The main reason for the reduction in contracting out was the reduction in rebates of national insurance contributions that were received by people who contracted out. The rebates from 2012 onwards were set at 4.8 per cent of the relevant earnings band when a figure of over 10 per cent would have been more justifiable. The reforms proposed in this paper would ensure that the rebates of national insurance contributions given to those contracting out of the state scheme would reflect the value of the state pension benefits that were given up.