NHS pension employer contributions break through 20% ceiling

The Department of Health and Social Care has confirmed that from 1 April 2019 the NHS Pension Scheme employer contribution rate will increase from 14.38% to 20.68%. 

The rise is disclosed in the Department’s response to a consultation, and ignores the fact that most respondents to that consultation disagreed with the proposal. 

The rise will affect both the practice profits and personal superannuation contributions of GPs. 

Consultation document proposals

Section 4 on page 13 onwards of the consultation covers the contribution increase. In summary, the main points with paragraph references are: - 

1. The majority of the respondents disagreed with the proposal (4.13).
2. Despite this, the increase will be implemented from 1 April 2019 (4.19).
3. NHS/Government committed to provide additional funding to offset the increase until 2023/2024 (4.23).
4. For 2019/20 (April 2019 to March 2020) the existing 14.38% will continue to be paid, with the DHSC paying the balance up to 20.68% (4.27).
5. From 2020/21, the expectation is that the practice will pay the increase, offset by an increase in funding (4.29). 

From a personal tax perspective, in relation to the partners own ‘employer’ contributions, if HMRC treats the extra funding as taxable trading income, the extra funding would attract a 2% Class 4 National Insurance (NI) Charge. This cannot be offset by the additional employer contributions paid out, as pension contributions do not qualify for NI relief.  

If you would like to know more about the proposed changes to NHS Pensions, please contact our GP and NHS Pensions expert Steve Tucker for more information.