Useful definitions and terms
Age addition (retirement pension)
This is an additional amount of money given to you if you are aged 80 or over. Any Retirement Pension Premium you would otherwise be entitled to receive will be reduced by the amount of any age addition you receive.
This is a component of the retirement pension payable to you based on the number of tax years throughout your working life for which you have satisfied the relevant contribution conditions, referred to as qualifying years.
Category A, B and D Pensions
Retirement pensions are categorised in the following ways:
Category A is based on your own NI record
Category B is based on the NI record of your spouse or civil partner and is only available to married women, civil partners, widows or widowers
Category D is a non contributory pension paid to certain people who are over 80
Control of Employment Act
The Control of Employment Act means the Control of Employment Act 2014 and the Control of Employment Regulations 2015 made under that Act. This legislation gives protection of employment for local workers by requiring that UK and other European Economic Area ("EEA") nationals must be issued with a permit in respect of their particular occupation before they are allowed to work on the Island. Persons from other countries are governed by different immigration laws as in the UK. Further details can be found on the Work Permit page.
Employed earners (generally, employees) pay National Insurance contributions on the amount of their earnings which exceed the primary earnings threshold set for that tax year.
Employers pay National Insurance contributions for their employees on the amount of their employees' earnings exceeding the secondary earnings threshold for that tax year.
Graduated Retirement Benefit
This is a component of the retirement pension based on contributions paid between 6 April 1961 and 5 April 1975.
Guaranteed minimum pension
Prior to 6 April 1997, in order for a salary related occupational pension scheme to contract out of SERPS, it had to promise to provide a Guaranteed Minimum Pension to those who were members of that pension scheme, which was broadly equivalent to what SERPS entitlement they would have been entitled to had they not contracted out of SERPS.
From 6 April 1997, such schemes have instead had to satisfy a scheme based test (reference scheme test), as laid down out in the Pension Schemes Act 1993, which requires the scheme to provide benefits equivalent to or better than those of the reference scheme.
Isle of Man worker
To qualify for an income-related benefit (income support, income-based jobseeker’s allowance or employed person’s allowance) you must you must be an “Isle of Man worker” as well as satisfying the other qualifying conditions for benefit.
A person is an “Isle of Man worker” for income-related benefit purposes if they would be an Isle of Man worker for Control of Employment purposes in most cases. However, you cannot qualify as an IOM worker for benefit purposes if you could only do so for work permit purposes by being –
(a) in full-time education (in the IOM or elsewhere) while you are ordinarily resident in the Isle of Man; or
(b) the spouse or civil partner of a person mentioned in (a).
The 7 categories of persons who are an “Isle of Man worker” for income-related benefit purposes are as follows.
Born in the IOM
You were was born in the IOM.
Ordinarily resident in the IOM
You have at any time been ordinarily resident in the IOM for an unbroken period of at least 5 years.
The spouse or civil partner of an Isle of Man worker
You are the spouse or civil partner of an IOM worker and you are allowed to live in the IOM under immigration law.
The surviving spouse or civil partner of an Isle of Man worker who has died
The following conditions are met–
(a) You were married to, or the civil partner of, an IOM worker;
(b) Your marriage ended when your spouse or civil partner died;
(c) You were ordinarily resident in the IOM immediately before your spouse or civil partner died; and
(d) You have been ordinarily resident in the IOM since your spouse or civil partner died.
The former spouse or civil partner of an Isle of Man worker following divorce etc.
The following conditions are met–
(a) You were married to, or the civil partner of, an IOM worker;
(b) You and your spouse or civil partner lived together for an unbroken period of 3 years after you married or formed a civil partnership;
(c) Your marriage or civil partnership was ended by divorce, dissolution or annulment;
(d) You were ordinarily resident in the IOM immediately before your marriage or civil partnership ended; and
(e) You have been ordinarily resident in the IOM since your marriage or civil partnership ended.
The child of an Isle of Man worker serving in HM armed forces
The following conditions are met –
(a) You are the child of a parent who is (or was immediately before their death) an IOM worker (but not under this category); and
(b) when you were born your parent was either serving in HM armed forces or they were married to, or the civil partner of, a person serving in HM armed forces.
The child of an Isle of Man worker born in the IOM
The following conditions are met–
(a) One of your parents was born in the IOM; and
(b) Your parent was ordinarily resident in the IOM for an unbroken period of at least 5 years immediately after their birth.
Lower earnings limit
Whilst employed earners actually start paying National Insurance contributions once their earnings exceed the primary earnings threshold set for that tax year, if their earnings reach the annual lower earnings limit they are treated as if they had paid contributions at 0% on any earnings they have up to the primary earnings threshold. Earnings on which contributions are paid at that zero rate count towards a person's entitlement to contributory benefits, such as Jobseeker's Allowance or Incapacity Benefit. This protects the National Insurance records of low paid earners.
Maternity Allowance threshold
This is an amount used to calculate entitlement to the variable rate Maternity Allowance. That is, if your earnings over 13 consecutive weeks in the 66 weeks preceding the expected week of confinement are more than the Maternity Allowance threshold, then the variable rate can be paid.
Variable rate Maternity Allowance is paid at one of 2 rates, 90% of average earnings or at Standard Rate, whichever is lower.
Visit the Maternity Allowance page and download leaflet NI17A(IOM) which may also be useful.
National Insurance credits
National Insurance credits are awarded to people's National Insurance records for periods during which they were in receipt of certain benefits and, in some cases, unable to work.
With some exceptions, such credits similarly count towards a person's entitlement to contributory benefits as contributions do.
You will get National Insurance credits if you are claiming one of the following benefits:
- Jobseeker's Allowance
- Incapacity Benefit
- Maternity Allowance
- Carer's Allowance
- Employed Person’s Allowance
You will also get National Insurance Credits if you are on an approved training course, on jury service and you do not earn as much as the lower earnings limit that week, you are a man approaching age 65 (but from 6 April 2010 these credits are being phased out in line with the increase in women's State Pension age) and for the years in which you have your 16th, 17th and 18th birthdays (but no new awards will be made from 6 April 2010).
The credits will give you the same entitlements as if you had paid contributions except for restrictions in respect of certain benefits, such as contribution based Jobseeker's Allowance, Incapacity Benefit and the Pension Supplement.
You do not need to apply to have credits added to your record, these will be applied automatically.
A person is generally Ordinarily Resident in the country in which their main home is, for example, where they have settled, even if they spend short periods away from that country from time to time.
Normally, if you are liable to pay income tax as a resident in the Isle of Man, then you will probably be considered to be Ordinarily Resident for Social Security purposes.
Personal Capability Assessment
How we determine if you are incapable of work or not for social security benefits depends on how long you have been claiming benefit for.
Own occupation test
For the first 28 weeks you are normally subject to the own occupation test.You normally need toprovide us with a sick note from your GP or hospital doctor or consultant to show that you are incapable of work under the own occupation test.
Personal capability assessment
After 28 weeks of first being incapable of work (or sooner if, for example, you were unemployed or self-employed immediately before you became sick) we will decide if you are incapable of work or not using the personal capability assessment (PCA). Under the PCA we need information about your capability to perform certain work-related activities which are set out in legislation.
There is a –
a) a series of activities relating to your ability to carry out certain physical and mental functions (e.g., mobility); and
b) a series of descriptors for each activity which most accurately describe your condition (e.g., the distance you can walk without help in relation to the mobility activity).
You score a number of points against the descriptor which applies to you - the more restricted you are in carrying out the activity, the higher number of points.
If you score at least 15 total points in respect of all the descriptors we will treat you as incapable of work under the PCA.
We will send you a questionnaire setting out those activities and descriptors for you to say which descriptor most closely describes your condition. You can also provide any other information you have about your condition you want us to see.
You must complete the questionnaire and return it to us within the required time. If you don’t do so without good reason we may treat you as capable of work and your benefit will stop. But we won’t need you to complete a questionnaire if we feel that we already have enough information to decide if you are incapable of work or not.
When we get your completed questionnaire from you, we will look at what you have said and review any other information we have and consider if we can decide if you are capable of work or not at that stage. We may decide that we need you to undergo a medical examination with a health care professional to decide if you are incapable of work or not.
If you don’t attend a medical examination we need you to have without good reason we may treat you as capable of work and your benefit will stop.
We will treat you as being incapable of work in certain circumstances without needing you to have a PCA (e.g., if you have certain health conditions or are receiving certain types of medical treatment).
In certain exceptional circumstances, we may treat you as being incapable of work even after you have been found capable of work in accordance with the PCA.
Qualifying Earnings Factor
This is the figure which represents the amount of earnings on which employed earners have paid contributions at 0% or 10% or have been treated as paid where National Insurance credits have been awarded to those earners.
A Qualifying Year for benefit purposes is a year in which you have paid, or you were treated as having paid, National Insurance on earnings of 52 times the Lower Earnings Limit for that year. This means that in order to make a year qualify you must either:
- Earn 52 times the Lower Earnings Limit or more as an employed earner
- Be credited with 52 Class 1 National Insurance Credits
- Pay 52 flat rate Class 2 National Insurance Contributions as a self employed earner
- Pay 52 voluntary Class 3 National Insurance Contributions
Reduced Earnings Allowance
This is an allowance which you can get if you had an accident at work or started to suffer from a disease as a result of your job before 1 October 1990. There are other conditions attached to entitlement such as you must be permanently unable to follow your regular occupation. You can still claim it now if you can show you had a disease or accident before this date. You get an amount based on your current job or a job you could do compared to the job you previously worked on a regular basis. If your current earnings are less you can get an amount based on the difference.
If you feel you may be entitled to this contact General Benefits for more advice.
SERPS (State Earnings Related Pension Scheme) - Additional Pension
Between 6 April 1978 and 5 April 2002 employed earners have built up entitlement to SERPS on earnings in excess of the prevailing lower earnings limit.
Severe Disablement Allowance (SDA)
SDA was payable to customers who had not paid sufficient National Insurance Contributions to qualify for Incapacity Benefit after they had been incapable of work for 28 weeks. It was abolished for all new claims with effect from 9 April 2001.
This is a supplement that is payable to you under the industrial injuries or war pensions scheme. You must be pensionable age and unable to work.
Contact us at General Benefits for more details.
Upper Earnings Limit
Employed earners pay National Insurance contributions at the main rate of 11% (unless special circumstances apply to them) on earnings falling between the primary threshold and the upper earnings limit. They pay National Insurance contributions at the rate of 1% on earnings falling above the upper earnings limit.