In the 1995/2008 NHS pension scheme, there is an officer scheme and a practitioner scheme. In the officer scheme, an individual’s tier is based on their whole-time equivalent (WTE) income. A practitioner's tier is based on actual earnings. The Government has tried to apply this WTE rule to practitioners in the 2015 scheme, but the regulations are extremely complicated.
Essentially, this regulation means that certain members – those who have transitioned to the 2015 scheme and who have taken breaks within the pension scheme year – may have to tier their pension contributions at a higher rate based on their annualised earnings, rather than their actual earnings.
Further to the agreement not to penalise anyone who returns the Type 2 certificate late, the Department for Health and Social Care has agreed that annualising should not apply (in relation to the completion of the 2016/17 Type 2 certificate) to long-term locums who have worked beyond six months in one practice and were previously deemed to be locums for the first six months and type 2 GPs thereafter. If you have been required to annualise your earning due to this rule alone, you can resubmit your form and your contribution tier will be corrected and any overpayment repaid to you. Read the statement from NHS pensions.
If you are in the 1995 or 2008 scheme you do not have to annualise your pensionable earnings – the tier you pay is based on your practitioner earnings. Having raised this as a concern the Type 2 form has been updated to include a tab for these members.
Annualising from 1 April 2019
When the Department of Health and Social Care (DHSC) advised that the method of calculating ‘annualised income’ should change from ‘annualise then add’ to ‘add then annualise’ they advised that the concessions regarding breaks in service would be removed. This was with immediate effect with regards to the 1- month concession for Type 1 and 2 GPs. However, for locums the 3- month break concession was retained until 31 March 2019, after which the concession was removed.
From 1 April 2019 any break in pensionable service, for any type of GP, will be required to be taken into account when calculating annualised income in order to arrive at your pension tier.
We have delayed releasing our guidance as NHS Pensions have not responded to our queries. This remains to be the case and the guidance we offer below is based on our understanding of the regulations.
In practical terms this means that annualising will work as follows:
- A full or part-time Type 1 GP who has an underlying contract from 1 April to 31 March in any given year can undertake any additional GP work (SOLO, Type 2, locum) and their total actual pensionable income will be equal to their annualised income. In this example the method of annualising will be total actual pensionable income x 365/365 because they have been under contract for 365 days.
- A full or part-time Type 2 GP who has an underlying contract of employment from 1 April to 31 March in any given year can undertake any additional GP work (SOLO, locum) and their total actual pensionable income will be equal to their annualised income. In this example the method of annualising will be total actual pensionable income x 365/365 because they have been under contract for 365 days.
- A Type 1 GP who does not have an underlying contract for the full year from 1 April to 31 March will need to total the number of days during which they undertook pensionable employment during the scheme year. If any other type of GP pensionable work was undertaken outside of the contract period, this needs to be added to arrive at their total number of pensionable days worked. Annualised income will then be arrived at by multiplying total GP pensionable income x365/ number of days of pensionable service.
- A Type 2 GP who does not have an underlying contract of employment for the full year from 1 April to 31 March will need to total the number of days during which they undertook pensionable employment during the scheme year. If any other type of GP pensionable work was undertaken outside of the contract period, this needs to be added to arrive at their total number of pensionable days worked. Annualised income will then be arrived at by multiplying total GP pensionable income x 365 / number of days of pensionable service.
- A GP who exclusively locums will need to add the total number of days they have worked. In this example the method of annualising will be total actual pensionable income x 365/number of days worked.
If, for example, a locum is engaged by a practice from 1 April to 30 September to work one day a week and then continues beyond six months at that same practice their annualising will depend on whether they choose to continue to be treated as a locum or to be treated as a Type 2 GP beyond the six month period.
If they choose to have all the work pensioned via locum forms A and B then their annualised income is arrived at by multiplying their pensionable GP locum income by 365 and dividing by 52 (days worked as a locum).
If they choose to pension the first 6 months via locum forms A and B and the latter as per the Type 2 salaried GP method then they will multiply their pensionable GP locum income by 365 and divide by 208 (26 days worked as locum and 182 days treated as though under a contract of employment as a Type 2 GP (albeit that the locum continues to work 1 day a week for the second 6 month period).
- Any GP who also undertakes officer pensionable work alongside will have the contribution for officer work determined separately and based on the Whole-Time Equivalent for the officer work undertaken. Income from officer pensionable work should not be included when calculating the GP tier.
SOLO forms and number of days worked
NHSBSA have suggested that any SOLO pensionable work is treated as underlying pensionable work for the full scheme year. This is because the SOLO form is completed for the period 1 April to 31 March. This implies that if an exclusive locum were able to undertake even one day of SOLO pensionable work then for the purposes of annualising they could detail 365 days worked in the scheme. As NHSBSA have so far failed to engage further on this matter we would suggest that you contact them directly to confirm the position on the SOLO form and then complete your Type 2 certificate accordingly. The harsh impact of annualising may be avoided in this way.
We understand that NHS Pensions have also advised that appraisal work could detail the number of days worked on that appraisal, rather than as the one day of the appraisal.
Similarly, we understand that NHS Pensions have also advised that any locum work could detail the number of days worked on administration or follow up tasks, rather than as the actual day of work at the practice.
Again, we would suggest confirmation of this directly with NHSBSA and then completion of the Type 2 form accordingly.
The impact of annualising may be significantly reduced should NHSBSA formally confirm this guidance.
The locum 10 week rule
The 10 week rule is the time limit by which pension forms should be submitted by locums. The 10 week rule begins at the end of any period of engagement with a practice.
Whilst the employer contribution tier has increased 14.38% to 20.68%, for 2019/20 locums should continue to request only the 14.38% employer contribution as the balance will be made up directly by HM Treasury.
Read the NHSBSA guidance
We still have unanswered questions about these unfair regulations, and NHS Pensions’ responses are unclear on how they are being applied. Until we receive clarification, we suggest directing all queries about annualisation to NHSBSA, which administers the scheme: [email protected]
For other pension queries, please contact the BMA pensions team: [email protected]
We are currently in the process of seeking legal opinions on the options available to us to challenge these regulations.
Read the BMA's latest previous statement regarding annualisation