National Insurance savings

Employee benefit services

Summary of Moore Kingston Smith Financial Advisers’ employee benefit services:

Pensions including auto-enrolment

Pensions are compulsory under auto-enrolment regulations. A good pension scheme is an excellent tool for employee retention and reward. Schemes where the employer contributions are higher than the statutory minimum, of course, have the competitive edge.

Often seen as complex and confusing, pensions should fit the specific requirements and demographics of each organisation. A reliable benchmarking review against sector and market is a good first step.

Choosing the right structure is key, as is getting impartial guidance on the investment options, which applies to both employer and employees. If employees need help with alternative options, they should get specialist financial planning advice. A good pension consultant can also give guidance on legislative issues.

Pension contributions are a tax-deductible expense for the employer. The employee usually receives tax relief on their contributions. National insurance relief may also be available for both employer and employee if pension contributions are paid by salary sacrifice.

Group life assurance (also known as group death in service)

In the event of an employee’s death, this pays a lump sum to beneficiaries, usually their spouse or children. It is either a fixed monetary amount or a multiple of basic salary. It is set up under a discretionary trust, so the sum assured is paid outside the probate system. This means it is not liable to inheritance tax.

Premiums are a tax-deductible expense for the employer and a non-taxable benefit in kind for the employee.

Group income protection

In the event of long-term incapacity following illness or injury, the employee receives a continuing income. It takes over from an organisation’s standard sick pay arrangement. It pays a percentage of the employee’s salary monthly for a specific duration or until a certain age. It can also cover pension and national insurance contributions.

It can include an absence management service and rehabilitation support during the employee’s recuperation. The benefit is paid gross to the employer, with the employee then paid via the PAYE system, minus tax and national insurance contributions.

Premiums are a tax-deductible expense for the employer and a non-taxable benefit in kind for the employee.

Group critical illness

In the event of a serious, life-threatening illness, an employee receives a tax-free lump sum – either a fixed amount or a multiple of their salary. The payment is triggered when an employee survives for a specified period. This is regardless of the employee’s ability to continue working or recovery duration.

Each insurer defines the medical conditions covered which include the most serious conditions, such as cancer, kidney failure and heart attack. Employers can choose to include extra conditions.

Premiums are a tax-deductible expense for the employer and a taxable benefit in kind for the employee.

For group life assurance, group income protection and group critical illness, unless otherwise specified, no medical evidence is required up to a specified limit – the free cover limit. Large-value free cover limits are available even for small memberships and underwriting is required for cover above this limit.

The cost of premium depends on the level of cover, employee age profile, location and industry. For schemes with fewer than ten members, it is calculated on an age-rated basis, meaning the risk rating is different for each member. Larger schemes work on a unit-rated basis and the risk rating is the same for each member.

An employee assistance programme (EAP) is often provided as a no-cost additional benefit for the above services.

Group private medical insurance

This covers the associated costs of private medical treatment in the UK. Employers can tailor the product to make it as comprehensive as possible, covering a wide range of GP-referred medical treatments.

A choice of underwriting is available, affecting whether pre-existing health conditions are covered. The cost of premium is usually calculated on an age-rated basis, meaning it increases as a member ages. Additionally, membership size can affect the premium rates, with larger schemes sometimes obtaining lower rates. The employer can tailor cover levels to meet their requirements and budget.

Premiums are a tax-deductible expense for the employer and a taxable benefit in kind for the employee.

Contact Employee Benefits Consultant Paul Beck on 020 7566 4031 or for more information regarding employee benefit services.

National Insurance savings

Mitigating the impact on employers and employees

From 6 April 2022, National Insurance contributions (NICs) will rise by 1.25% for both you as an employer and your employees, which will clearly affect your business and your employees’ take-home pay.

What does this mean for you as an employer?

Employers pay NICs on employee annual earnings above £9,100. This will increase to 15.05% (previously 13.8%). Without exact payroll figures and pension contribution rates, we can only give a guide as to the increase in NICs and the amount you and your employees can expect.

One way you could help to mitigate the NIC increases is to consider a pension salary exchange. This is where the employer pays the employees’ workplace pension contributions directly. As the contributions are deducted before tax and NICs less is paid by you as the employer and your employees, employers may retain ALL, SOME or NONE of the savings in NICs. You could use these savings to pay additional pension contributions to enhance employees’ pensions or fund other employee benefits.

Figure 1 – examples of potential savings for employers 
All figures are approximate and effects are per annum.



What does this mean for your employees?

Employees aged 16 upwards earning £9,880 pay National Insurance (subject to the recent announcement made by the Chancellor in the Spring Statement – see below). This qualifies them for certain welfare benefits and the State Pension. Currently, this will be at an increased rate of 13.25% on earnings between the primary threshold (£9,880) and upper earnings limit (£50,270); and 3.25% on earnings over the upper earnings limit. Previously, the applicable rates were 12% and 2%.

Figure 2 – examples of how the 1.25% rise affects a range of employee salaries
All figures are approximate and effects are per annum.



Future changes covered in the Chancellor’s Spring Statement

The Chancellor has announced that the threshold at which workers start paying NICs will increase from an annual amount of £9,880 to £12,570 as of 6 July 2022. The three month delay from the start of the tax year gives employers a chance to ensure their software has been updated.

The new threshold of £12,570 will align with the income tax personal allowance.

What does this mean for your employees?

Essentially, employees earning up to £60,000 will benefit from the increase in the threshold by approximately £356 (£2,690 increased threshold limit at 13.25%). However, for higher earners with salaries of over £80,000, there is likely to be an increase in NICs where the 3.25% charge over the upper earnings limit outweighs the increase in the primary threshold.

If you have any questions, for example, reducing the impact of the NIC rise with pension salary exchange, please contact your usual Moore Kingston Smith adviser, or our Employee Benefits Consultant, Paul Beck, on 020 7566 4031 or Alternatively, fill in the ‘contact us’ box and Paul will give you a call.



Lead Contact

Paul Beck

Employee Benefits Consultant, Chartered Financial Planner
+44 (0)20 7566 4031
Email: Paul Beck

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