Associates, Incorporation and the NHS Pension Scheme

This important update is from Thomas Dickson of Essential Money

Dear Alun

We know that many associates have been encouraged to incorporate over the last couple of years. However one of the main disadvantages was that we were pretty sure this was going to affect eligibility for the NHS pension. The Department of Health have now made it clear that from 7th November associates that are operating through a Limited Company will no longer be eligible for the NHS Pension Scheme.

Providers
A GDS or PDS Practice may be owned by a single-hander or by a partnership. It may also be a company limited by shares (or DBC). Where a shareholder is a qualified (and listed) dentist they are afforded type 1 dental Practitioner/Provider status under the NHSPS Regulations. As you would suspect if the shareholder is not a qualified dentist they do not have access to the NHSPS.
A shareholder must ‘pension’ all the GDS/PDS income that they take (i.e. draw down) from the business in the form of salary and dividends. Any GDS/PDS income that is not taken but left in the business cannot be pensioned now or in future years.
If a Provider opts out of the NHSPS or is ineligible to join their colleagues cannot ‘pension’ their GDS/PDS income.

Performers
If a Performer (i.e. Associate) works for a GDS/PDS Contractor as an individual they are also afforded type 1 dental Practitioner NHSPS status. However if a Performer creates a limited company and works at the Practice through that limited company they (or anyone else who works for the Performer’s limited company) cannot pension their GDS/PDS income with effect from 7th November 2011. This is because this sub-contractor limited company is not recognized under the statutory NHSPS Regulations.
So a Performer must work as an individual (not through a unique limited company) to be able to pension their GDS/PDS income with effect from the 7th of November 2011.
For more information on whether the tax benefits of incorporation outweigh the advantages of your NHSPS eligibility please reply to this email or call me on 0121 685 5060.

Employers Responsibilities
Another issue is that the pensionable income for some associates may have been understated on the ARR completed by the GDS/PDS practices at year-end. Basically an associate’s NHS pensionable pay must be no less than their net GDS/PDS income. So if their contract value was £150,000, their net income at 43.9% would have been £65,850. NHS Dental Services will soon be writing to those associates whose NHS pensionable pay may have been understated outlining the method to correct any error. The relevant providers (i.e. contractors) will also be written to.

NHS Pension Scheme Changes As a result of Lord Huttons report into public sector pensions, the Government has made it clear they will introduce changes to the NHS pension scheme in 2015. The good news is that they have also made a commitment that all pension benefits earned up to that point will be protected.
The main reason for this is that people are living longer and pensions are costing more. This cost has fallen on the tax payer. In the meantime therefore there is also a proposal to increase member contributions from April 2012 for anyone earning over £15,000 year which to be fair is most of our clients.
For those earning over £21,000 a year, the increase could be an additional 2.4% in 2012/2013 rising to an extra 6% in 2014/2015. This is in addition to the 6.5% or more that members are currently paying.

For more information or for some Q&As on this please – click here

Any questions please call me.

Best Regards
Thomas Dickson
Essential Money Limited
www.essentialmoney.co.uk
w: 0121 685 5060
m: 07973 136 365
f: 0121 685 5065

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