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How should the 14% employer's superannuation contribution be treated in the practice accounts?


Re the 14% employer's pension contribution: We are an eight partner practice with 3 three-quarter time and one half-time GPs and the rest full time.

I took retirement in June 2006 and then went back to full time practice for one year and then ¾ time from November 1st 2007. The senior partner retired in 2004, returning to full time. We changed from GMS to PMS in April 2004.

The two of us are in dispute with the rest of the partnership over the 14% employer's contribution. As I understand the calculation was based on the superannuable earnings of the partners in situ at the time and that this amount was automatically uplifted each year along with the other elements of the 'core/baseline funding' by a certain percentage (I believe this was 3.225% for the first 3 years with no uplift for subsequent years) and that this funding would remain the same regardless of any change in composition of the partnership.

Since then a full-time partner retired, to be replaced by another full-timer and we have taken on a full time salaried GP whose 14% employer's contributions have to be met by the partnership.

I appreciate that the 14% that was originally earmarked for the two 'retired' partners is no longer being paid into our pensions but the fact remains it was meant for us and currently it is being divided amongst the partners in their profit-sharing ratios.

I would like your opinion as to what is the fairest way of dealing with this problem.

To further complicate matters the out-of-hours earnings of four of the partners (the rest of us do not do any OOH) and other out-of-practice activities are being channelled through the practice accounts with the result that the practice is having to pay their 14% employer's contribution.

Given that this is personal income, treated as prior shares in the accounts, it would seem only fair that the employer's element is paid by the recipients of these funds and not by the practice as a whole.

Then there is the matter of dispensing income, QOF and enhanced services and elements of baseline funding which were not superannuable prior to 2004.

I am told that the employees and employer's element is built into the amounts received for QOF and enhanced services.

Again the two retired partners appear to be at a disadvantage in that whilst the others are having their 14% paid from these funds, the two of us lose out as the remaining funds are then divided amongst the partners in their profit sharing ratios.

Bob Senior

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Readers' comments (1)

  • But what is the correct treatment of this issue of how to treat the employers contribution as it is deemed to be an income earned by all the partners even if retired but rejoined again after 24 hr retirement they should be entitled to draw this at their profit sharing ratio along with full timers as well loosing thismay affect seniority

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