Benefits - Pensions

The NHS Pensions Agency confirmed with the BMA Pensions Department that a limited company is liable to contract a PCT for the provision of GMS services/PMS.

Doctors in such a practice will need to write to the NHSPA (or SPPA) to obtain employer status. Assuming they obtain employer status the salary that doctors draw from the company is able to be pensioned in the NHS pension scheme and this will be on a practitioner basis.

Any such doctors will need to consider how much they pay themselves as salary. The NHSPA suggests that prior to establishing the company, the doctors write to the agency to ensure that their status is acceptable. This will partly depend on the aims of the organisation as it must be on the 'not for profit' basis similar to out-of-hours providers.

A Limited Company can contribute a higher amount than 100% salary for the doctor as the pension contribution could be treated as part of the remuneration package. Therefore if a Company has been paying £5000 a year salary to the shareholder/director and the rest of the remuneration is paid as dividend, that director could receive a higher amount for the pension contribution in the Limited Company accounts. However the amount of contribution is very much dependant on the local Tax Inspector.

NHS Pension Scheme - New vs Original

Commencing 1 April 2008, the NHS introduced a new pension scheme to all their medical practice employers. All members in service prior to April 2008 between the age of 16 and 75 can stay in the original scheme. Any new joiners from 1 April 2008 and certain re-joiners and any member between the ages of 16 and 75 who elects to transfer are eligible to the new scheme.

Fundamental differences between the schemes

	Original	New
Pension Age	60	65
Accrual Rate	1/80th	1/60th
Final Salary definition	Best of last 3 years	Best 3 years average within last 10 years
Lump Sum	Automatic tax-free cash sum in addition to pension	No lump sum
Survivors Pensions	More generous	Less generous

All members of the Original Scheme will be given a one off choice to switch to the New Scheme between 1 July 2009 and 30 June 2010. Retirement before age 65 will normally results in reduction of benefits. People who want to work to ages 65 or are forced to do so due to limited assets might actually gain from joining the new scheme.

If in doubt about choice seek independent financial advice.

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