The Government Actuary has published his annual report on the National Insurance Fund for Great Britain(NIF). The report projects contribution income and benefit expenditure in future financial years and is a source of information for ministers and parliamentarians.
Report content
The report:
- projects contribution income, benefit payments and the balance of the NIF over the coming financial years
- provides information for Parliament as it independently scrutinises the government’s draft legislation for up-rating social security benefits and pensions and updating National Insurance contributions (NICs) terms
NICs receipts are paid to the NIF and the NHS.
Headline results
The Up-rating Report shows income is expected to exceed expenditure in the next financial year (2023 to 2024) by £2.7 billion, which would take the balance of the NIF to £70.3 billion at 31 March 2024.
In subsequent financial years, expenditure is expected to exceed income with the Fund balance declining to the end of the projection period.
The projected Fund balance at 31 March 2028 is £37.1 billion. Based on these figures, it is not anticipated that any payment will be required to the NIF from HM Treasury over the next 5 years.
An unusual year for the Fund
The financial year 2022 to 2023 has been unusual for the Fund for 2 reasons.
For the first time in over 30 years, NICs rates, limits, and thresholds were changed mid-year. There were 2 such changes in 2022to 2023 which had the overall effect of reducing Fund income by an expected £2.6bn in the year.
Additionally, rapid price rises throughout the economy led to unusual increases in the annual rate of inflation such that the September 2022 Consumer Prices Index was some 10.1% higher than a year previously. The majority of benefits payable from the NIF (predominantly state pension payments) are proposed to increase in line with this CPI increase, which would be the largest such increase for over 30 years. This is projected to increase the cost of benefits by £12.1 billion in the year 2023 to 2024.
These factors contribute to the report projecting a declining balance of the Fund from 2024 to 2025 throughout the projection period to 2027 to 2028.
Additional information
The report contains variant projections. These are provided to illustrate sensitivity of results, and do not reflect current government policy.
