Search Legislation

National Insurance Contributions Act 2008

Annex Glossary:

TermExplanation
Additional PensionThis is the earnings related element of state pension –accrued from 1978 to 2002 under SERPS (“State Earnings Related Pension Scheme”) and since 2002 under the S2P (“State Second Pension”) scheme (see sections 44, 44A, 45 of and Schedule 4A to the SSCBA 1992).
Basic State PensionThis is the flat rate element of state pension (see section 44 of the SSCBA 1992).
Class 1 contributionsThese are contributions paid by employees and employers on earnings that exceed the primary and secondary thresholds (which are set at the same level).
Contracted-out rateContracted-out rate contributions are contributions payable in respect of earnings paid to earners who are in contracted-out salary related or contracted-out money purchase employments.
Lower Earnings LimitHistorically the lower earnings limit (see section 5 of the SSCBA 1992) was both the point at which a liability to pay National Insurance Contributions arose and the point at which entitlement to contributory benefit began. It is also the point at which contracted-out rebates become payable. In 2001 the point at which contribution liability arises was changed to a new earnings threshold, aligned with the income tax personal allowance. Despite this change, the lower earnings limit retains both its contributory benefit and contracting-out rebate purposes.
Primary ThresholdThe primary threshold (see section 5 of the SSCBA 1992) is the point at which employees begin to pay National Insurance contributions.
Secondary ThresholdThe secondary threshold (see section 5 of the SSCBA 1992) is the point at which employers begin to pay National Insurance contributions.
State Second PensionThis is the name for the earnings related element of state pension from 2002.
State PensionThis is the generic name for retirement pension payable under the SSCBA 1992.
Upper Accrual PointThe upper accrual point (see section 122 of the SSCBA 1992) is a new threshold which from April 2009 replaces the upper earnings limit as a feature in state second pension and contracted-out rebate calculations.  The Act provides for the upper accrual point to be a weekly figure for both state second pension and contracted-out rebate purposes.  Once introduced the amount of the upper accrual point will be frozen.
Upper Earnings LimitHistorically the upper earnings limit (see section 5 of the SSCBA 1992) was both the point at which a liability to pay primary Class 1 contributions ended and the point at which entitlement to contributory benefit was capped. It was also the point at which contracted-out rebates were capped. In 2003 an additional Class 1 contribution liability on earnings in excess of the upper earnings limit was introduced and it became the point at which liability for Class 1 contributions at the main primary percentage ceased. Despite this change, the upper earnings limit retained both its contributory benefit and contracting-out rebate purposes. Following the introduction of the upper accrual point the upper earnings limit will no longer be of relevance in the calculation of state second pension or contracting out rebates.

Back to top

Options/Help

Print Options

Close

Explanatory Notes

Text created by the government department responsible for the subject matter of the Act to explain what the Act sets out to achieve and to make the Act accessible to readers who are not legally qualified. Explanatory Notes were introduced in 1999 and accompany all Public Acts except Appropriation, Consolidated Fund, Finance and Consolidation Acts.

Close

More Resources

Access essential accompanying documents and information for this legislation item from this tab. Dependent on the legislation item being viewed this may include:

  • the original print PDF of the as enacted version that was used for the print copy
  • lists of changes made by and/or affecting this legislation item
  • confers power and blanket amendment details
  • all formats of all associated documents
  • correction slips
  • links to related legislation and further information resources