Life in the diaspora: Money matters – understanding taxes, pensions and national insurance
By Mary Opii
One of the earliest shocks for many Nigerians working in the UK is the moment the first pay slip arrives. You may already have calculated in your mind how much you should earn at the end of the month, only to discover that the amount that lands in your bank account is far less. The difference? Taxes, National Insurance, and pension contributions, deductions that are automatic and non-negotiable.
In Nigeria, the idea of tax is often abstract, sometimes avoided, and rarely explained clearly to workers. But in the UK, it is a structured system, and you cannot escape it. The government deducts tax at source through the “Pay As You Earn” (PAYE) system, which means you never even see the money before it is removed. The rates vary depending on how much you earn, and this can feel discouraging at first. A new arrival might find themselves asking: “Am I working for myself or for the government?”
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Then there is National Insurance (NI). This deduction may seem mysterious to many at first, but it serves an important purpose. NI contributions fund vital benefits such as healthcare, state pensions, and, in some cases, unemployment support. For Nigerian immigrants used to paying for most healthcare services out-of-pocket back home, it is reassuring to know that contributions here support the National Health Service (NHS). Yet, when you see the percentage taken each month, the reassurance is often mixed with frustration.
Pensions are another compulsory deduction that many Nigerians find puzzling. From your very first job, part of your salary is put aside for retirement. Employers are required to contribute as well, which is actually an advantage. However, for newcomers still struggling to find their financial footing, the idea of saving for retirement, decades away, can feel unnecessary. Many would rather have every penny in hand now, especially those still supporting families back home. But over time, many come to appreciate the system. Unlike the uncertainty of retirement savings in Nigeria, pensions in the UK are monitored and regulated, giving workers greater security in old age.
I recall my own first payslip in the UK. I had calculated what I thought I should be taking home, only to see a significant difference. It felt like money had simply vanished. It took a colleague patiently explaining each line of the deductions; tax, NI, pension, for me to finally understand. What seemed like a loss at first turned out to be the reality of working in a system designed to support citizens both now and in the future.
For Nigerian immigrants, these deductions highlight a broader truth: life in the UK demands financial discipline. The wages may look good on paper, but your real earnings are what remain after the government takes its share. The sooner we understand and accept this, the better we can plan, save, and live without disappointment.
