NHS pension issues are the fault of the government, not the employer, Michael Watson says.
‘You’re doing it wrong’, says Alan Suggett, dental business unit partner at the accountancy firm UNW.
When your accountant tells you that you are getting it wrong, it’s time to sit up and take notice.
It almost certainly means you are losing money.
Although in this case it will be your associate who may have lost £25,000 over the last 10 years because of errors in the calculation of their NHS superannuation contributions.
The error happens when NHS practice-owning dentists complete the annual reconciliation return (ARR), telling NHS pensions how much their associates have earned.
Alan says that ‘many, perhaps most, ARRs are completed incorrectly.’
Let him explain: ‘The problem started with the 2006 new NHS contract, which, for the first time, created a system of practice-based NHS pensionable earnings, rather than the previous individual calculation.’
When the 2006 contract came into being, it required the contact holder to perform a calculation specific to each associate.
The problem, Alan says, is that many principals think they understand how the calculation works – but in fact they don’t.
They think that the correct pensionable earnings entitlement for each associate is 43.9% of the associate’s ‘gross’ fees generated, whereas in fact the correct pensionable earnings figure is equal to the amount payable to the associate in respect of NHS work carried out in the year.
Typical errors made lead to an increase in the principal’s pensionable pay, and a reduction in the average associate’s pensionable pay, leading to disputes that are often difficult to resolve.
As Alan says, this is an ‘appalling situation’, so why is no one doing anything about it?
Who’s at fault
NHS Pensions, the agency responsible for superannuation, apparently regards these disputes as being commercial.
No they are not.
The NHS pension is paid by the government; mine is and since I qualified for it under the old scheme I am reasonably certain it is accurate.
Practice owners are responsible for the correct completion of the annual reconciliation return, just as they are responsible for accurately calculating and collecting the amount of income tax and National Insurance due from their employees.
I am grateful to Alan Suggett for his help in preparing this blog and allowing me to quote from UNW’s dental bulletin.