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Foundation Dentists Pension Hiccups

Prior to the Annual Reconciliation Report (ARR) deadline of 30 June 2018, we helped many Associate dentist clients to calculate their Net Pensionable Earnings (NPE).

An issue we commonly see concerns first year Associates and adjustments to their NHS Pension contributions paid at their Foundation Dentist (FD) practice. When completing the NPE for our first year Associate clients, we have noticed on Compass that the FD practice sometimes receives a refund of pension contributions for them as an FD a couple of months after they leave. The refund is triggered by the Associate’s new practice incorrectly entering a low estimated NPE figure for the remainder of the year for the Associate (commonly £0.01 which is the minimum allowed). This results in their pension contribution rate for the year falling from 9.3% to as low as 5%. Typically, although any refund should be paid to the FD via the FD practice, it is often not.

Once FDs become Associates many will perform UDAs for the rest of the financial year (i.e. between September and March). When the ARRs are finalised, the FD practice will then have additional pension contributions to pay over for the FD, which are likely to be the exact figure that was refunded to them previously by the FD practice! We have seen instances where the practice asks the (ex) FD for these contributions even though they did not pass over the initial refund in the first place.

Another scenario occurs if the FD becomes a relatively high earning Associate once they leave their FD practice. When this happens, their combined Net Pensionable Earnings as an Associate, together with the FD salary earned in the first part of the year may take them into a higher NHS Pension Contribution tier rate. The following summer as part of the ARR process, the FD practice may see a deduction ontheir NHS Schedule for NHS Pension contributions in respect of the ex-FD, reflecting the uplift in the NHS Pension contribution rate. For example an increase from the FD contribution rate of 9.3% to say the 12.5% band would require extra contributions of £418. 

So far as Principals are concerned, they should make sure that they are still able to contact their ex-FD so that they can ask for these additional pension contributions that they effectively end up making on behalf of the FD, to be refunded to them by the FD. 

So far as FDs are concerned they should first of all be aware of the possibility of this happening. However if they are asked to refund pension contributions to their FD practice after they have left, we strongly recommend that they contact us so that we can advise whether or not any extra payments being asked for are correctly calculated.