GPs prepare for legal battle with PCT over £1.2m error
All GPs, whether partner, associate or locum, have to pay superannuation. Contributions are accumulated across a whole career, the total then counting toward your final NHS pension.
Issues are now more complicated, with new rules for GP principals, large numbers of GPs now working in more than one NHS setting and different payment methods across the groups. Therefore the potential for mistakes is also much greater. The best safety-net is to make regular checks yourself.
Superannuation is now paid on all NHS profit and, as the figure for each financial year is not known until after the accounts are published, ie several months after the financial year-end, the amount paid during the year must be an estimate. A balancing payment is made later; in fact the first of these, for 2004/5, should be paid in May 2006.
With the old system the PCT calculated the superannuation payable. Now practices must do this themselves. In the first year of the new system most practices simply uprated payments by a conservative amount over the previous year. The problem with this is that income actually rose at a faster rate (national averages are 36 per cent for the combined 2003/4 and 2004/5 years and a projected 10 per cent for 2005/6).
This means the balancing payment due in May 2006 is likely to be large. This is compounded by the fact that payment is now made at 20 per cent rather than 6 per cent, as the employers' 14 per cent element of superannuation is now paid direct to practices that then make the whole payment.
As the balancing payment will be made in the 2006/7 tax year, tax relief on the balancing payment will not be available until January 2008.
This raises two issues. The first is that practices must set aside a hefty sum to cover the 2004/5 balancing payment. The second is that an adjustment must be made to current year payments as soon as the 2004/5 figures become available from accountants. If this is not done then cash-flow problems due to large balancing payments will continue.
When practices began making their own payments there was initially some disparity among PCTs regarding collection of superannuation. Some deducted the money before paying practices and others paid practices gross, expecting regular payments back. Some asked for monthly payments and others quarterly, a lack of uniformity that was typically NHS!!
Most PCTs have now settled on a quarterly deduction from practice income. Practices complete a form detailing how much should be deducted and itemising payments per GP. Associate (salaried) GPs are included on the same form. Alterations can be made before the next payment.
You must make sure the total superannuation payment for partners is a close reflection of expected NHS profits. As mentioned above, check your current payments against the actual NHS profit for 2004/5 as soon as figures become available. Uprate these by around 10 per cent, also making allowance for any 2005/6 underpayments to date.
Check that seniority and other 'prior shares' are accurate and credited individually to the partners concerned. If you are in any doubt, ask your accountant to help.
A spreadsheet is essential for producing your superannuation figures. This not only allows accuracy but also easy adjustments and amendments when, for instance, seniority levels change. Let all partners have an up-to-date copy so they can see and check their own figures. Notify the PCT of changes as soon as possible.
You must ensure the PCT acknowledges each deduction in writing. This is usually done via your monthly income statement. Check that this figure matches your own. Up to now all principals received a statement of annual superannuation payments. The new annual statement, produced by your accountants and sent to the PCT, may take its place.
In any event you must keep all relevant documents. I also strongly advise that all GPs also get an annual pension statement from the NHS Pensions Agency.
In this way you can check that last year's contributions have been credited, your current pension forecast and also that earlier years contributions are accurate (there are often mistakes crediting previous hospital service to GPs).
Finally note that for technical reasons the Inland Revenue has not yet agreed on a method of tax relief for the employers' 14 per cent contributions, now paid to practices. We are therefore currently being taxed on this money as extra income but not yet getting any tax relief. This anomaly being looked at urgently but may not be resolved in time to reduce our January 2006 tax payments.
As an associate you are employed and so employee superannuation payments, 6 per cent of your salary, should be deducted monthly by your employer who adds a 14 per cent employers' contribution. Your contribution should be shown clearly on your payslip.
Check that each deduction is correct. Be especially alert following salary increases as your contribution should also rise proportionately. Raise any queries with your employer.
Remember that your 6 per cent deductions are tax deductible and this should be reflected in your PAYE tax deductions. You should check with your employer and, if necessary, the Inland Revenue that this is the case.
You should also request an annual pension statement from the NHSPA.
If you are a self-employed locum GP you should have registered with a 'host' PCT, usually the one in whose area you do the most work. You must then keep a signed record of all GP locum work and send these monthly with your 6 per cent employee contribution to the pension officer of that PCT. The PCT adds the 14 per cent employers' contribution and then passes them on to the NHSPA.
Ask for written confirmation of receipt and keep copies of all correspondence. Once again a spreadsheet is a useful tool for both calculating the correct amount and recording payments. Show your total payment on your tax return to ensure tax relief is granted. If you have had problems getting a PCT to act as host, contact your LMC and/or BMA urgently.
If you work for the same practice for three months or more doing regular sessions, such as a maternity locum, your practice must count you as employed and arrange PAYE. Superannuation payments will then be as for associate GPs above. Request an annual pension statement as above.
GPs from any of the above groups may have more than one NHS job. In this case it is important to settle superannuation issues before you start work.
Many GPs already working as GPwSIs, on the PEC or for co-ops, have found to their cost that their paying body, often a cash-strapped PCT, has been very reluctant to pay the 14 per cent employers' contribution on top of the agreed salary.
In fact under the 'NHS profit' rules
some GPs have had to choose whether to pay 20 per cent or not be superannuated at
all. Most LMCs are chasing this one vig-
Keep all records separately and check
that payments are actually reaching the NHSPA.