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October pension changes could affect GP take-home pay, experts warn

October pension changes could affect GP take-home pay, experts warn

NHS pension scheme changes that came into force in October may have an impact on GP take-home pay, according to expert analysis.

Some lower-earning GPs may see their take-home pay decrease, while higher-earning GPs could see their take-home pay increase.

On 1 October, four changes were made to the way that GP pension contributions are calculated. This included calculating NHS pension contributions based on actual pensionable pay, rather than based on a ‘whole time equivalent’ model.

The number of contribution tiers, which specify different levels of GP pension contributions according to salary levels, was also reduced.  And the actual amount GPs pay into their pension pot at each tier has changed.

Finally, the pay thresholds for pension contribution tiers were uplifted in line with the annual Agenda for Change pay awards to reduce the chances of pension scheme members falling into a higher contribution band due to this pay rise.

The changes to the contribution tiers and contribution rates will be made in two stages, with some already in effect from this October and more amendments being made in 2023 – with exact dates still to be confirmed.

While these changes will not affect the value of pension benefits at retirement, according to head of medical at Wesleyan Financial Services Alec Collie, they may affect how much GPs pay into their scheme and therefore their take-home pay.

For example, he explained, a GP earning £25,000 would have previously paid £1,775 per annum in pension contributions. This will increase to £2,075 per annum after the second stages of these pension changes are completed in 2023, giving them less take-home pay.

However, a GP earning £120,000 per annum pre-October would have paid £17,400 in annual pension contributions. This will decrease to £15,000 in 2023, giving them £2,400 more in take-home income annually.

Mr Collie said: ‘Because of the reduction in the number of tiers and the ultimate “flattening” of the contribution structure, some lower-earning GPs see their take-home pay decrease, while some higher-earning GPs may see their take-home pay increase.’

 ‘Overall, however, higher earners still pay more,’ he added.

He said: ‘Amid a rising cost of living and ongoing challenges with pension taxation, some members may be considering opting out of the NHS pension scheme. We always urge caution around this decision. The NHS pension scheme is, in most cases, great value for money.’

To see a full list of the new pension contribution tiers and rates for GPs for both 2022 and 2023, see the full analysis from Alec Collie on our sister title Pulse Intelligence.

 A version of this story was first published by Pulse’s sister title Management in Practice



Please note, only GPs are permitted to add comments to articles

Truth Finder 10 November, 2022 6:06 pm

Anyone still trust their pensions? Anyone?

John Evans 11 November, 2022 10:35 am

They are content to allow everyone to breach the LTA and also when receiving pension for more to reach the 40% higher tax threshold – both of which will be frozen for prolonged periods – any full timers will have to get used to pension scheme being for only part of their working career.