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In a nutshell... the NHS pension for GP partners

How the employer's share of NHS pension contributions for GP principals is funded

Jenny Stone: contributions should be treated as part of drawings (Photograph: LH Lancy)
Jenny Stone: contributions should be treated as part of drawings (Photograph: LH Lancy)

Under the pre-2004 GMS contract, GPs paid their employee's NHS pension contributions and the PCT, as their 'notional' employer, paid the employer's contribution on their behalf.

When the 2004 contract was introduced, the way contributions were calculated changed to being based on NHS profits. Profits were expected to rise, so the government decided to make partners responsible for the employer's contribution.

Funding was provided in practices' global sum equivalent and PMS baseline, based on the historical cost of the employer's contribution. QOF and enhanced services income also included funding towards the employer's 14 per cent.

HM Revenue and Customs guidance stated that deductions for the employer's contribution were not a practice expense, but should be treated the same as the employee's contribution. This means deductions for the employee's and the employer's contributions should be treated as the individual partner's cost, as part of their drawings.

Practice income
Practice income includes funding for the employer's NHS pension contribution, which is shown in the profit and loss account and included in the overall net profit. The profit is allocated to partners based on normal profit-sharing ratios.

This means that each partner receives a share of the income to fund employer's NHS pension contributions as part of their profit share, to go towards the cost of their employer's NHS pension contribution.

If a partner takes 24-hour retirement and returns to work, there will be no change to the global sum, QOF and so on, and they will still receive their share. They will no longer be paying NHS pension contributions, so they can draw this income out of the practice.

Example of current accounts
  Dr A Dr B
Share of profit 150,000 150,000
Employee’s NHS pension 0 (11,000)
Employer’s NHS pension
0 (18,000)
Profits available to draw 150,000 121,000
Drawings per month 12,500 10,083

Partners' drawings are calculated as their share of profit, less NHS pension contributions and tax. If two partners share profits equally, but one pays NHS pension and the other does not, their individual share of profits will be the same, although the partner who does not pay NHS pension will be able to draw more of their profit out of the practice. The partners still earn the same amount, which is their share of profits of £150,000 (see table below right), the only difference being that Dr A no longer pays NHS pension, so to ensure that each partner's current accounts are equal, Dr A should take higher drawings.

  • Jenny Stone is a partner at specialist medical accountants Ramsay Brown & Partners

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