The Department of Health has published its planned contribution rate hikes for the NHS Pension Scheme. DH officials will be negotiating with health unions, including the BMA, on the plans – but have warned that GP pension contributions could increase by as much as six percentage points by 2014.
The BMA has attacked the plans as a ‘tax on health professionals’, while the DH insists the NHS Pensions Scheme ‘will still represent an excellent investment’. But away from the politicking, what does it mean for GPs?
How will the increased pension reforms affect me?
The DH has confirmed that the highest earners will be hardest hit by the pension reforms. The table below shows the rates in full.
Table 1: Proposed increases to contribution rates (before tax relief)
Contribution rate (before tax relief) 2011/12
Contribution rate (before tax relief) 2012/13
Contribution rate increase (before tax relief) in 2012/13
£48,983 to £69,931
£69,932 to £110,273
How will this affect current pay?
If you are a GP earning:
- £150,000: you will pay an extra £3,600 in pension contributions in 2012/13
- £110,000: you will pay an extra £2,646 in 2012/13
- £100,000: you will pay an extra £2,300 in 2012/13
- £80,000: you will pay an extra £1,840 in 2012/13
- £60,000: you will pay an extra £1,200 in 2012/13
- £50,000: you will pay an extra £1,000 in 2012/13
What about tax relief?
The DH says that NHS Pension Scheme employees ‘benefit from significant tax relief’ on pension contributions. With GP pension contributions taken out of pay before they are taxed, the DH says this will have a ‘beneficial effect’ on pension contributions and cushion the blow of the GP pension hike. The table below shows the DH’s calculations for contribution rates adjusted for tax relief.
Table 2: Contribution rates net of tax relief
Full-time pay 2010/11
Contribution rate after tax relief 2011/12
Contribution rate after tax relief 2012/13
Additional cost (£ per year)