Pension Issues Affecting GP practices and individual GP's

Over the last few years there have been several changes to the NHS Pension scheme that affect both GP practices and individual GPs.

Increase in Employers’ Contribution

It was recently announced that the employer’s pension contribution will increase from 14.38% to 20.6% from 1^st April 2019. The intention is that this will not be a cost to practices and for 2019/20 the increased cost will be centrally funded. It is anticipated that from April 2020 the global sum will increase to give practices funding to pay this cost.

The increase in the employer’s contribution is in respect of all members of the NHS Pension scheme, so will apply to both practice staff and GP partners alike.

Final Pay Control Charge (1995 Scheme only)

Many practices are unaware that the NHS Pension Agency can issue a practice with a final pay control charge in respect of a member of staff taking their pension. This regulation is only relevant to members who have a pension based on their final salary. If this member receives a pay increase in any of the last three years of their service which is above an “allowable amount” the NHS Pension Agency will calculate a final pay control charge, which the employer who gave the pay increase has to pay.

The “allowable amount” threshold is set at 4.5% plus CPI. The final pay charge is the difference between the pension that is payable and the pension that would have been payable if the final salary was the same as the “allowable amount”.

This is mainly a problem for non-clinical partners such as practice managers or nurses where they receive a share of profits. Profits can go up or down and if the increase is more than the allowable amount, the practice would potentially be liable for a final pay charge.

Salaried GP Superannuation and Type 2 Certificates

There is still an ongoing issue regarding salaried GP pensions. Unfortunately many salaried GPs are not aware of the importance of completing Type 2 certificates, which should be completed each year and submitted to PCSE by 28^th February. This has been a requirement since 2009. This has caused two issues, firstly salaried GPs are likely to find their pension record incorrect and secondly, the PCSE have not carried out a reconciliation of any under or over payment from the practice. For practices that are clients of RBP, we reconcile salaried GP superannuation and compare the amount due to NHSE to the amount the PCSE have deducted from the monthly statements and provide a creditor where the practice has underpaid. For some of our clients, this has resulted in them holding onto large amounts of money which is owed to

the PCSE.

The NHS Pension Agency is working with the PCSE to reconcile and collect these payments. However, practices need to be aware that these amounts are likely to be deducted in one go and without notice.

For any salaried GP that has not completed their type 2 certificates, the recent certificates are still available on NHS Pension Agency website together with an amnesty certificate which GPs can complete going back to 2009.

https://www.nhsbsa.nhs.uk/member-hub/information-practitioner-locum-and-non-gp

GPs Opting Out of the NHS Pension Scheme

Over the last few years there has been an increase in the number of GPs coming out of the NHS Pension scheme permanently or opting in and out of the scheme to try and reduce their tax and pension growth. The reason many are doing this is either because they are reaching the lifetime allowance or they have large annual allowance tax charges because their pension growth exceeds the standard annual allowance or tapered annual allowance.

We should point out that if you opt out of the scheme for more than 5 years your pension will only increase by inflation for those years, but you will lose the 1.5% uplift. We, therefore, recommend that you rejoin the scheme again within 5 years if you wish to retain this.

You will also lose the excellent in-service benefits should something happen to you during your working life if you are opted out for a complete scheme year.

We have also seen some GPs reducing their sessions to reduce their income and the impact of the annual allowance tax charges. Hospital doctors and consultants are also refusing to work overtime to reduce their income, resulting in increased waiting lists in hospital.

Currently members of the NHS Pension scheme are required to pension all of their NHS earnings and cannot pick and choose how much they pay into the NHS Pension scheme. This does mean that some GPs are faced with significant growth in their pension resulting in large tax charges and also, they are likely to reach the lifetime limit much sooner and several years before they reach retirement age.

Due to these issues, the BMA have asked the government to consider a partial pension scheme so GPs could choose to halve the rate at which their pension builds up in return for half rate contributions. This would be a major change to the way GPs contribute and build up their pension so we will have to wait to see if any action is taken in this regard!