UNISON is today (Tuesday) warning George Osborne that scrapping tax rebates on pensions will leave more than five million public sector workers worse off.
The rise in National Insurance (NI) payments will hit pay packets in April 2016. This is when the current 1.4 per cent rebate for employees and 3.4 per cent for employers will be abolished. It means earnings could drop by around £22 a month for those on a £25,000 annual wage. The wage bill for the NHS could soar by £1bn and by £800m for local government, says UNISON.
In a letter to the Chancellor, UNISON General Secretary Dave Prentis said: “We are hugely disappointed with the Treasury for not doing more to alert people to the impact of these changes.
“It is unacceptable for the government to be complacent about staff waking up next April to an unexpected pay cut – one they neither fully understand nor have been able to plan for. These changes are just six months away. The government must do more to make both employers and employees fully aware of these NI tax rises.
“I am also urging you to rethink and delay the abolition of this NI rebate. Scrapping the rebate couldn’t come at a worse time- workers are still struggling to make ends meet and councils are likely to see their budgets cut even further.”
Notes to editors:
The introduction of the Single Tier State Pension from April 2016 is accompanied by the ending of contracting out from defined benefit pension schemes. Official statistics show 5.3m public sector workers and 2.8m private sector workers are active members of these schemes.
As a result:
- affected employees will lose their 1.4 per cent rebate and pay NI contributions of 12 per cent from April 2016 instead of the current 10.6 per cent
- affected employers will lose their 3.4 per cent rebate and pay NI contributions of 13.8 per cent from April 2016 instead of the current 10.4 per cent