DEFINITION of 'National Insurance Contributions - NIC'
Payments made by employees and employers into the United Kingdom's National Insurance (NI). National insurance contributions initially funded programs for the ill and unemployed, and later on eventually paid for state pensions too. Contributions fall into categories which can either count toward an individual's eligibility for benefits or are paid without counting towards any type of entitlement depending on the category it falls under.
BREAKING DOWN 'National Insurance Contributions - NIC'
National insurance contributions are made through payroll and income taxes. Over the years, contributions expanded to cover other government-provided benefits. Limits on contributions were removed from upper income levels, making this a more redistributive program.