National Insurance is a social security system that was established in the United Kingdom in 1911. It is a mandatory contribution made by individuals and employers towards social security benefits, such as state pension, sick pay, and unemployment benefits. The money collected from National Insurance contributions is paid into the National Insurance Fund, which is used to fund these benefits.
The National Insurance system is a contributory system, which means that individuals and employers make contributions based on their earnings. The amount of National Insurance that an individual is required to pay depends on their earnings, with higher earners paying more. Employers are also required to make National Insurance contributions on behalf of their employees.
National Insurance contributions are divided into different classes, each with its own contribution rate and entitlements. Class 1 contributions are paid by employees and employers, and are used to fund the majority of social security benefits. Class 2 contributions are paid by self-employed individuals, and Class 3 contributions are voluntary contributions that can be made by individuals who want to fill gaps in their National Insurance record. Class 4 contributions are paid by self-employed individuals on their profits.
The National Insurance system provides a range of benefits for individuals, including the state pension, which is a regular payment made to individuals who have reached the state pension age. Other benefits include maternity and paternity pay, bereavement benefits, and disability benefits.
In addition to providing social security benefits, National Insurance also funds the National Health Service (NHS), which is the UK’s publicly funded healthcare system. A portion of the National Insurance contributions made by individuals and employers are used to fund the NHS, which provides a wide range of healthcare services, including doctor visits, hospital treatment, and emergency care.
The National Insurance system has undergone several changes over the years, with the most recent changes being introduced in 2019. These changes include the removal of the upper earnings limit, which means that individuals earning more than a certain amount are required to pay National Insurance contributions on their entire income. The changes also include the introduction of a new benefit, called the National Living Wage, which is designed to ensure that individuals earn a minimum wage that is sufficient to cover their basic living expenses.
In conclusion, National Insurance is a crucial social security system in the United Kingdom that provides a range of benefits for individuals, including the state pension, sick pay, and unemployment benefits. It is a contributory system that is funded by individuals and employers, with higher earners paying more. National Insurance also funds the National Health Service, which is the UK’s publicly funded healthcare system. The system has undergone several changes over the years, with the most recent changes being introduced in 2019.