The latest raft of changes to NHS pensions came into force in April this year, many of which will have an impact on GPs and partner-owned practices. The changes are the most current set made after the findings of the ‘McCloud Judgement’ and resultant ‘McCloud Remedy’ which sets out to solve the age discrimination in public sector pension schemes and consolidate practitioners into one scheme.Â
With the dust now settled after April 1st, we spoke to Zeeshan Hussain from FK Medical, a specialist in medical practitioners’ affairs, to learn more about the impact these changes will have on GPs and their businesses.Â
A summary of the changes
- Reform of the contribution tiers and amounts: The number of tiers will reduce from 11 to 6; for some, employee contributions will reduce; and for others, contributions will remain the same. The highest tier rate now is 12.5% down from the previous high of 14.5%.Â
- Employers will contribute more: Employers’ contributions will rise from 20.6% to 23.7% of pensionable pay – 23.78% if inclusive of administration charges. But practice owners shouldn’t panic, as the rise will be covered by central payments from NHS England.Â
- Changes to tier reviews: Tiers and rates will be reviewed each April in line with the Consumer Price Index. Later in the year, if the Agenda for Change pay award is higher than the CPI increase – the rates will again be changed accordingly.Â
- Overtime for part-time staff will be pensionable up to 37.5 hours: This brings the 2015 scheme in line with the regulations applied to the 1995 and 2008 pension schemes.
- Abatement rules will be removed for Special Class and Mental Health Officer: This means that from age 55, Special Class and MHO members can stay in work whilst still taking up to 100% of their pension benefits. They will also be able to continue to build up pension benefits in the 2015 Scheme – without having their pension reduced or stopped.  Â
- Applying for partial retirement: Members of the 1995 pension scheme with maximum service will be able to apply for partial retirement.Â
- Lifetime allowance charges scrapped: Update to pension scheme regulations will ensure that the lifetime allowance continues to operate as it should.Â
- Carer’s leave will be classified as pensionable service: A fair amendment which has been introduced in line with the Carer’s Act 2023. Note for employers – you will as a result have to continue to pay contributions throughout the period of carer’s leave, with the employees making their own contributions once they return to work.Â
The changes are, generally speaking, being acknowledged as a step in the right direction by GPs. The newly fixed rates will provide clarity for practitioners’ financial planning; rates increasing in line with the Consumer Price Index should help to protect against inflation; removal of abatement rules for special classes will enable more vital skills to reenter the NHS from retirement; and supports hardworking medical professionals.Â
What this means for GPs and their practices
The changing rules and regulations for NHS pensions haven’t made it easy for medical practitioners to plan for retirement. It’s messy, it’s complicated, and you need to stay on top of all the moving parts to be able to plan in the most financially savvy way.Â
Here are our recommended actions for any General Practitioner, employer or employee, looking to make the most of the NHS Pension Scheme.Â
Knowing your numbersÂ
If you’re a GP, there’s a good chance the changes to NHS Pensions in the last few years will have affected a) your annual allowance tax position, and b) your accrued pension benefits. In some cases, your tax position might worsen, but your pension benefits will improve and it’s only by knowing your numbers and seeing the bigger picture that you will make a decision that works for you.Â
The complexity of the NHS Pension Scheme means that there really is no ‘one size fits all’ advice for practitioners to get bang for buck. Instead, it’s about assessing your earnings, contributions, and goals for retirement to find a path forward that best suits your needs.
Understand the rulesÂ
Having a basic understanding of the NHS pension scheme, the changes that have been made, and which changes affect you will help you maximise what you get out of your pension. This latest set of changes has made it a little easier to forecast so if you’re in the early stages of your career you may want to set out a firm plan for retirement now (if you haven’t already done so).Â
Staying up to date with the latest updates will at the very least mean you can have an informed and productive conversation with your accountant about how best to plan for the future.Â
Look out for revised pension statements in October
We’re expecting the NHS to issue revised pension statements in October and November this year. This should give you a firmer idea of where your contributions are and if you need to put a plan in place for the future.Â
For some, the revised statements might not have the numbers expected. If this is the case, it’s well worth reviewing your total reward statement, which will give you a summary of your pension history. In fact – this is a great thing to do on an annual basis as it allows you to ensure all information is present and correct.Â
Keep on top of your paperworkÂ
Linked to the above, errors in your pension statement can commonly be caused by missing Type 1 or Type 2 pension certificates. The role of a GP is busy and stressful – so we appreciate it’s easy to let the paperwork slip. If you’ve missed the submission of any certificates, there are steps you can take to mitigate and ensure your records and contributions are up to date. Getting this done will give you a clearer set of numbers to work with and discuss with your accountant.Â
Speak to your accountant
For practical advice on the impact of the changes on your pension and your tax position please contact your specialist medical accountants Darren Fletcher and Zeeshan Hussain.
Disclaimer
GPs should seek independent financial advice on pensions we can only advise on the tax impacts.