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October pension changes could affect GP take-home pay

by Beth Gault
9 November 2022

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Pension changes that came into force in October may have an impact on GP take-home pay, according to analysis.

Some lower earning GPs may see their take-home pay decrease, while higher earning GPs could see take-home pay increase.

On 1 October, four changes were made to the way GP pension contributions are calculated. This included calculating NHS pension contributions based on actual pensionable pay, rather than based on a ‘whole time equivalent’ model.

The number of contribution tiers, which specify different levels of GP pension contributions according to salary levels, were also reduced.  And the actual amount GPs pay into their pension pot at each tier has changed.

Finally, the pay boundaries associated with contribution tiers was linked to the annual Agenda for Change pay awards to reduce the chances of GPs falling into a higher contribution band due to this pay rise.

The changes to the contribution tiers and contribution rates will be made in two stages, with some already in effect from this October and more amendments being made in 2023, the exact date of which is still to be confirmed.

While these changes will not affect the value of pension benefits at retirement, according to head of medical at Wesleyan Financial Services Alec Collie, they may affect how much GPs pay into their scheme and therefore their take-home pay.

For example, he explained, a GP earning £25,000 would have previously paid £1,775 per annum in pension contributions. This will increase to £2,075 per annum after the second stages of these pension changes are completed in 2023, giving them less take-home pay.

However, a GP earning £120,000 per annum pre-October, would have paid £17,400 in annual pension contributions. This will decrease to £15,000 in 2023, giving them £2,400 more in take-home income annually.

Mr Collie said: ‘Because of the reduction in the number of tiers and the ultimate ‘flattening’ of the contribution structure, some lower earning GPs see their take home pay decrease, while some higher-earning GPs may see their take-home pay increase.’

 ‘Overall, however, higher earners still pay more,’ he added.

‘Amid a rising cost of living, and ongoing challenges with pension taxation, some members may be considering opting out of the NHSPS. We always urge caution around this decision. The NHSPS is, in most cases, great value for money.’

To see a full list of the new pension contribution tiers and rates for GPs for both 2022 and 2023, see the full analysis from Alec Collie.