What does National Insurance pay for?

You probably know that your National Insurance pays for your State Pension. But what else does National Insurance pay for? Victor Garrett takes a look.

man counting money with the text “national insurance” and The Motley Fool jester cap logo

You probably already know that making National Insurance contributions qualifies you for the State Pension. But did you know they also qualify you for other benefits depending on your eligibility and the National Insurance class you fall under? So, what exactly does National Insurance pay for? Let’s find out.

The basic State Pension

A primary purpose of your National Insurance payments is to pay for your State Pension.

If you reached State Pension age before 6 April 2016, then you need at least 30 contributing years to be eligible for the full basic State Pension, which is £137.60 per week. If you haven’t made National Insurance contributions for the full 30 years, then you get less, but there are ways you can boost your State Pension.

The new State Pension

National Insurance pays for the new State Pension if you reach State Pension age after 6 April 2016. The State Pension you get depends on your National Insurance record. You need at least 35 contributing years to be eligible for the full new State Pension, which for the current tax year is £179.60 per week.

Note that if you don’t have at least 10 qualifying years, you won’t be eligible for any State Pension.

Additional State Pension

If you receive the basic State Pension, your National Insurance contributions can entitle you to an additional payment. However, how much you qualify for depends on various factors:

  • The number of years you paid National Insurance contributions
  • Your earnings
  • Whether you’ve contracted out
  • Whether you topped up your basic State Pension (you could only top up between 12 October 2015 and 5 April 2017)

It’s important to note that those eligible for the new State Pension don’t qualify for the Additional State Pension, but they can inherit it from their partner.

Contribution-based Jobseeker’s Allowance (JSA)

National Insurance pays for contribution-based Jobseeker’s allowance (JSA).

You can’t apply for JSA any more, but if you’re already receiving it, you’ll keep getting payments as long as you’re eligible and until your claim ends.

If not, the government recommends checking whether you’re eligible for Universal Credit or ‘new style’ JSA. You could even be eligible for both at the same time. National Insurance can pay for Universal Credit that helps you with your living costs, and the ‘new style’ JSA that helps you when you’re looking for work.

Employment and Support Allowance (ESA)

Your National Insurance contributions pay for ESA.

You may be eligible for ESA if you have a disability or health condition that affects how much you can work. This includes if you’re self-isolating due to Covid-19 and can’t work.

You can find out whether you’re eligible on the gov.uk website. However, note that if you’re receiving JSA or Statutory Sick Pay (SSP), then you may not be eligible.

How much you get depends on the stage of your application, your age and whether you’ll be able to return to work in the future.

Typically, you receive an assessment rate for 13 weeks while your claim is being assessed. If you’re aged under 25, you can receive up to £59.20 a week. However, if you’re above 25, you can receive up to  £74.70 a week.

Once your claim is assessed, you will be put in either:

  • A work-related activity group (people who can get back to work in the future) and receive up to £74.70 a week
  • A support group and receive up to £114.10 a week

Maternity Allowance

Maternity Allowance is also covered by National Insurance.

Those who don’t qualify for Statutory Maternity Pay qualify for Maternity Allowance. You can claim it once you’re 26 weeks pregnant. How much you get depends on your eligibility, so it’s a good idea to check the gov.uk website first.

You may receive one of the following:

  • £151.97 each week or 90% of your average weekly earnings (the lesser of the two) for 39 weeks
  • Between £27 and £151.97 each week for 39 weeks – the amount increases with each Class 2 National Insurance contribution you make
  • £27 a week for 14 weeks

Bereavement Support Payment (BSP)

Another benefit covered by National Insurance is BSP.

You might be eligible for BSP if your husband, wife or civil partner died in the last 21 months. However, to get the full amount, you need to claim within three months of your partner’s death.

Additionally, your partner must have paid National Insurance contributions for at least 25 years from 6 April 1975 or died from a disease or accident caused by work. More so, you must be under State Pension age and living in the UK or a country that pays bereavement benefits.

Typically, you’ll receive an initial payment of £3,500 and up to 18 monthly payments of £350 (higher rate) if you get child benefit. You’ll get an initial payment of £2,500 and up to 18 monthly instalments of £100 (lower rate) if you do not get child benefit unless you are pregnant.