Pandemic To Leave £5B Hole In UK Social Security Fund

By Irene Madongo
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Law360, London (January 21, 2021, 12:47 PM GMT) -- A government scheme that pays out retirement pensions and other social benefits expects to see a multibillion-pound shortfall because of COVID-19.

The pandemic is hitting the National Insurance Fund, the Government Actuary's Department said in a report on Tuesday. The department, which provides advice to the government and public bodies, cited higher unemployment levels and lower salaries, which are reducing the fund's income.

Lower salaries are a result of workers being furloughed during the pandemic, the department said. It added that it expects that receipts in 2020-2021 will be £5.4 billion ($7.4 billion) lower than what it projected last year, before the pandemic hit.

The fund is a pool of money sourced from contributions paid into it by salaried employees, the self-employed and employers. Money from the fund is used by the government to provide retirement pensions, unemployment pay and other benefits.

"Payments of working age benefits are increasing while 'excess deaths' caused by the pandemic are reducing payments of pensioner benefits," said the report.

The fund is projected to pay out state pension payments that will be £1 billion higher than in 2022, the report said.

Allowing for the impact of the pandemic, the report projects that income will exceed expenditure by £1.3 billion, and that the fund will not require any topping up from HM Treasury over the next five years.

Britain has been looking at ways to support people and businesses during the crisis, which is damaging the economy.

Nadhim Zahawi, a minister in the departments of business and of health, said on Monday that the state will provide insurance for care homes that take in patients that have tested COVID-19 positive but are struggling to get cover.

The government also set up a £500 million scheme in 2020 to help provide insurance for British film and TV productions that could not secure cover.

--Additional reporting by Martin Croucher. Editing by Joe Millis

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