GLOSSARY

National insurance contributions definition

What does National insurance contributions mean?

Mandatory contributions (also called NICs) from earnings that are principally intended to establish the individual's right to contributory benefits and to finance the National Insurance Fund, out of which the principal benefits are paid.

Pensions

Payments deducted from pay or declared through self-assessment, used by the DWP to fund the state pension and other state benefits, ie paid or credited contributions to the National Insurance Fund.
Class 1 National Insurance contributions are compulsory for employees and employers. Class 2 and 4 National Insurance contributions are compulsory for self-employed earners. Class 3 National Insurance contributions are voluntary. National Insurance contributions provide entitlement to specific benefits, including pensions from the state.

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