How pensions are shown in the practice accounts

Pension costs for the NHS pension scheme are split three ways:

1. Employee standard contributions – these are a based on different rates for different tiers of earnings
2. Employer contributions – fixed currently at 14.38% with a further central top-up by the NHS in England, Wales and Northern Ireland of 6.3%. In Scotland the top-up is paid for by the practice.
3. Added years or voluntary contributions – additional top-up contributions, paid for personally by individual scheme members. For the purpose of this article these are treated the same way as employee contributions.

Partner contributions

GP partners, and partners who are not GPs, have to pay both employee and employer contributions, even though they are not employees but partners in the business. Partner contributions should be deducted monthly from the practice GMS/PMS main payment. An end of year reconciliation submitted through a type 1 pension certificate leads to an end of year adjustment.

In the accounts these are deemed as personal payments of the partner and should be deducted from them either in the profit allocation, or as a drawing in the partner’s current account.

Salaried GPs

Salaried GPs are employees of the practice. Their employee contributions should be deducted from their salary through the payroll.

As a staff member, the employer contribution is paid for by the practice. Staff wages and pension costs are an expense of the practice and should be shown in the profit and loss account.

Salaried GP pension employee contributions should not be paid over with the non-GP staff pension contributions.

Instead, like the partners, the cost should be deducted from the monthly practice GMS/PMS payment. The salaried GP should submit an end of year type 2 pension certificate to check that the pension contributions paid over by the practice in the year were correct. If not, perhaps because the salaried GP had carried out additional work, then an end of year adjustment will be made.

All other staff

All other staff are employees of the practice. If they are enrolled into the NHS Pension Scheme then their pension contributions will be taken by a monthly adjustment of their salary through the payroll.

The employer contribution is a cost of the practice. As with salaried GPs, staff wages and pension costs are an expense of the practice and should be shown in the profit and loss account.

Pension estimates

Each year, for GP and non GP partners and salaried GPs, the practice should submit an estimate of pensionable pay to their local primary care support team so that the right level of payments can be deducted monthly off the GMS/PMS payment. The estimate should be updated when there is a change in circumstances – be it leavers or joiners or a change in profit share between the partners.

The next article will explain how to use the practice accounts to benchmark financial performance. If you have missed any of the previous parts, you can find them here: Part one, Part two, Part three, and Part four

Written by the Association of Independent Specialist Medical Accountants (AISMA)