National Insurance Fund
Encyclopedia
The National Insurance Fund represents the funds of the National Insurance
Scheme, set up by the British Government following World War II. In the Beveridge Report this was designed as part of a universal insurance system for all British people.
The funds are held in the National Insurance Fund (NIF), separate from Consolidated Revenue. Contributions are not "taxes" because they are not directly available for general expenditure by the government.
The income of the NIF consists of contributions from employees, employers and the self-employed, plus interest on its investments. The NIF is used to pay for social security benefits such as state retirement pensions, but not for the means tested Minimum Income Guarantee and Tax Credits. National Insurance contributions as a whole finance the National Health Service, but contributions are paid into the fund by the Secretary State net of moneys allocated to the NHS. Thus the NIF does not hold money directed for the general provision of health services in the UK. The government determines the total allocation for health each year and the allocation from each class contribution is calculated by the Government actuary.
Each year there is a surplus of the order of £2 billion. The NIF had a surplus of over £34 billion as at 2005/06, £38 billion in 2006/7 and the Government Actuary's Department
forecasts that this surplus will grow to over £114.7 billion by 2012.
The surplus is loaned to the government through the Debt Management Office which is part of the Commissioners for the Reduction of the National Debt in Call Notice Deposits (previously invested in gilt-edged securities) and interest on these invested monies is paid to the NIF - £1.3 billion in the 2007/08 year.
The balance in the National Insurance Fund at the end of each calendar month can be seen at the following government website:
http://www.dmo.gov.uk/index.aspx?page=CRND/Fund_Portfolio
By the government's "golden rule"
, borrowed money (which includes the NIF surplus) cannot be used to finance current expenditure. It can be used only for investment, mainly capital investment in infrastructure. The money in the NIF can be used only for payment of benefits and administration expenses.
Levels of benefit and contributions are set following the advice of the Government Actuary, who recommends that a prudential balance of two months contribution revenue (about £8 billion) should be kept in the fund.
National Insurance
National Insurance in the United Kingdom was initially a contributory system of insurance against illness and unemployment, and later also provided retirement pensions and other benefits...
Scheme, set up by the British Government following World War II. In the Beveridge Report this was designed as part of a universal insurance system for all British people.
The funds are held in the National Insurance Fund (NIF), separate from Consolidated Revenue. Contributions are not "taxes" because they are not directly available for general expenditure by the government.
The income of the NIF consists of contributions from employees, employers and the self-employed, plus interest on its investments. The NIF is used to pay for social security benefits such as state retirement pensions, but not for the means tested Minimum Income Guarantee and Tax Credits. National Insurance contributions as a whole finance the National Health Service, but contributions are paid into the fund by the Secretary State net of moneys allocated to the NHS. Thus the NIF does not hold money directed for the general provision of health services in the UK. The government determines the total allocation for health each year and the allocation from each class contribution is calculated by the Government actuary.
Each year there is a surplus of the order of £2 billion. The NIF had a surplus of over £34 billion as at 2005/06, £38 billion in 2006/7 and the Government Actuary's Department
Government Actuary's Department
The Government Actuary’s Department is a department of the Government of the United Kingdom responsible for providing actuarial advice to public sector clients....
forecasts that this surplus will grow to over £114.7 billion by 2012.
The surplus is loaned to the government through the Debt Management Office which is part of the Commissioners for the Reduction of the National Debt in Call Notice Deposits (previously invested in gilt-edged securities) and interest on these invested monies is paid to the NIF - £1.3 billion in the 2007/08 year.
The balance in the National Insurance Fund at the end of each calendar month can be seen at the following government website:
http://www.dmo.gov.uk/index.aspx?page=CRND/Fund_Portfolio
By the government's "golden rule"
Golden Rule (fiscal policy)
The Golden Rule is a guideline for the operation of fiscal policy. The Golden Rule states that over the economic cycle, the Government will borrow only to invest and not to fund current spending. In layman's terms this means that on average over the ups and downs of an economic cycle the government...
, borrowed money (which includes the NIF surplus) cannot be used to finance current expenditure. It can be used only for investment, mainly capital investment in infrastructure. The money in the NIF can be used only for payment of benefits and administration expenses.
Levels of benefit and contributions are set following the advice of the Government Actuary, who recommends that a prudential balance of two months contribution revenue (about £8 billion) should be kept in the fund.
External Links
- 2005 Report on the Fund by the National Audit OfficeNational Audit Office (United Kingdom)The National Audit Office is an independent Parliamentary body in the United Kingdom which is responsible for auditing central government departments, government agencies and non-departmental public bodies...
.