The NHS pension scheme will be changed from next month to clarify how GP pensionable earnings are calculated, the Government has confirmed.
This means that GP partners will need to provide a ‘revised’ annual certificate of pensionable earnings if their GP practice accounting year is not aligned with the tax year.
The changes, which were up for consultation until last month, were supported by the BMA and by the NHS Business Services Authority (NHSBSA), and will become effective on 1 April.
Other changes which were included in the consultation and will also be implemented include:
- amending the definition of overtime in the 2015 scheme so that it aligns with the long-standing policy and practice for additional hours worked by part-time staff to be pensionable up to whole time equivalent (WTE) hours – this will mean that part-time staff whose overtime hours previously did not count towards their NHS pension will have the choice of retrospectively being able to convert them into ‘pensionable hours’
- clarifying the method for calculating member contributions where pay reduces during a period of absence
- allowing members on neonatal care leave to continue building up pension benefits
- amending regulations to reflect the practice of treating members on parental bereavement leave in the same way as members on maternity leave, adoption leave, paternity leave and parental and shared parental leave
- allowing members who are affected by the McCloud remedy to revoke a deferred choice election or for a deferred choice election to lapse in certain circumstances
The Government said that the annual certificate change impacts around 30% of GP practices in England and Wales that do not align their annual accounting period with the tax year.
Medical accountants have previously told Pulse that the change will bring clarity around the way pensionable earnings are calculated in line with taxable profits.
What will the change mean?
From April last year, practices’ profits must be taxed on a ‘tax year’ basis, while previously they could be taxed on the basis of their annual accounting period, and this change had ‘a knock-on impact’ on the income tax affairs of some GP partners, who now need to report and pay income tax on the basis of their tax year rather than their practice’s accounting year profits.
The calculation of pensionable earnings for each scheme year (which runs from 1 April to 31 March) is based on an annual certificate of pensionable profits, based on the self-assessment tax returns members submit to HMRC, and so could be based on provisional figures which would not take account of the final figures provided to HMRC.
The changes mean that affected GPs will submit a revised annual certificate of pensionable earnings where their certificate was based on a provisional figure submitted to HMRC in their self-assessment tax return.
The Association of Independent Specialist Medical Accountants (AISMA) said that the change will bring clarity for the way pensionable earnings are calculated in line with taxable profits.
The consultation responses published by the Government today showed that 45% of respondents agreed with this change, which had also been recommended by the Association of Independent Specialist Medical Accountants (AISMA).
NHSBSA agreed with the proposal to change the wording of the regulations to support where a GP practice does not align its annual accounting period with the tax year and provisional figures have been included in the GP’s tax return and therefore also in the annual certificate.
The NHS pension scheme advisory board that their primary concern was ensuring that ‘no unexpected issues’ arise during the transition year in which the changes are implemented.
The Department of Health and Social Care will proceed with the proposal and ‘monitor any potential complications’ identified in the transition year, it added.
Two changes were also proposed and approved for GPs affected by the McCloud remedy. The Government committed age discrimination when reforming the NHS pension scheme in 2015, when most public service pension schemes were reformed, and has since sought to remedy this discrimination with new regulations, known as the McCloud remedy.
The first change will allow members to revoke a deferred choice election ‘within a reasonable period of time’ before benefits are due to be put into payment.
The second change will cause a deferred choice election made by a member to lapse in circumstances where the member dies more than 2 weeks before the day on which the first benefit payment is due.
As part of the same piece of legislation, the Government will also implement changes to scheme regulations necessary following the abolition of the lifetime allowance.
