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HMRC internal manual

National Insurance Manual

Class 1 NICs : Earnings of employees and office holders : Pensions up to 5th April 2006

Regulation 25 and paragraph 1 of Part VI of Schedule 3 to the Social Security(Contributions) Regulations 2001

Do not include any payment by way of a pension in gross pay for Class 1 NICs purposes.This applies to a pension payable in connection with long service, retirement orill-health and any pension which is commuted to a lump sum.

These payments are excluded from liability for Class 1 NICs under the above provisions.

For details of the Class 1 NICs position on payments made out of a retirement benefitsscheme on or after 6th April 2006, see NIM02700 (contents).