National Insurance is a system of social security contributions paid by workers and employers in the United Kingdom. It was first introduced in 1911 and is now a fundamental part of the country’s social security system. This article will explore the history of Insurance, how it works, and its various benefits and drawbacks.
History of National Insurance
National Insurance was first introduced in 1911 as a way of providing financial support to those who were unable to work due to illness, injury, or unemployment. The system was based on the principle of a social insurance fund, into which both employers and employees made contributions.
Initially, the system only covered manual workers earning up to £160 per year, and contributions were set at 4d (four pence) per week for employees and 3d per week for employers. The benefits available included sick pay, unemployment benefit, and pensions.
Over time, the system was expanded to cover a wider range of workers, and the benefits available were increased. For example, in 1948, the National Health Service was established, which provided free healthcare to all UK citizens.
In the post-war period, Insurance became an important part of the welfare state and was seen as a key way of ensuring that everyone had access to basic financial support in times of need.
How National Insurance Works
National Insurance contributions are made by both employees and employers. Employees pay a percentage of their earnings, while employers pay a separate contribution based on their payroll.
The amount of Insurance that employees pay depends on how much they earn. There are different rates of contribution for employees depending on their earnings, as shown in the table below:
Earnings per week Employee’s contribution rate:
| Earnings per week | Employee’s contribution rate |
| Up to £184 | 0% |
| £184.01 to £967 | 12% |
| Over £967 | 2% |
The money collected from National Insurance contributions is used to fund a range of benefits, including:
- State Pension: This provides a regular income for people who have reached retirement age.
- Jobseeker’s Allowance: This provides financial support to people who are out of work and actively looking for a job.
- Maternity Allowance: This provides financial support to women who are pregnant or have recently given birth.
- Bereavement Allowance: This provides financial support to people who have lost a spouse or civil partner.
- Industrial Injuries Disablement Benefit: This provides financial support to people who have been injured or become ill as a result of their work.
Benefits of National Insurance
One of the main benefits of Insurance is that it provides a safety net for people who are unable to work due to illness, injury, or unemployment. This means that people who are unable to work can still receive financial support, which can help to reduce poverty and social exclusion.
Another benefit of National Insurance is that it provides a source of funding for public services such as the National Health Service. This means that everyone has access to high-quality health care, regardless of their ability to pay.
National Insurance also helps to fund the State Pension, which provides a regular income for people in retirement. This means that people can enjoy a reasonable standard of living in their later years, without having to rely solely on savings or family support.
Drawbacks of National Insurance
One of the main drawbacks of Insurance is that it can be seen as an additional tax burden on both employees and employers. This is because Insurance contributions are deducted from people’s earnings, which means that they have less money to spend on other things.
Another drawback of Insurance is that the benefits available may not be sufficient to meet people’s needs. For example, State Pension may not provide enough income for people to live comfortably in retirement, especially if they have not been able to save for their retirement.
There is also a concern that Insurance may not be sustainable in the long term, as the population ages and the number of people claiming benefits increases. This means that there may not be enough money in the system to pay for all the benefits that people are entitled to.
Conclusion
National Insurance is a vital part of the social security system in the United Kingdom, providing financial support to those who are unable to work due to illness, injury, or unemployment. It also helps to fund public services such as the National Health Service and provides a source of funding for the State Pension.
However, National Insurance is not without its drawbacks, and there are concerns about its long-term sustainability. Nevertheless, it remains an important part of the welfare state and is likely to continue to play a key role in providing financial support to those in need.
Read More:
Details About Affordable Health Insurance – 2023
Boat Insurance: A Guide to Protecting Your Watercraft – 2023
Divorce Lawyer: All the Facts and 25 Questions to Ask Before Hiring
An Overview of Business Law: Functions and Importance
Complete Understanding of Criminal Law – 2023