The effect on practices income of GP's employer's contributions being funded through the global sum

Practices should be receiving their indicative budgets from their PCT detailing an estimate of the practices funding under the new contract. Included in these budgets is a final summary, which is intended to give the practice information on monthly cash flow, but the figures are misleading as deductions for superannuation have been omitted.

The global sum and the Minimum Practice Income Guarantee (MPIG) correction factor include amounts for the GP's own superannuation contributions and the GP's employer superannuation contributions which is the PCT contributions for the GP's as the notional employer.

Under the old GMS contract the GP's own superannuation contributions were deducted before payment was made for fees and allowances and the practice would receive the net amount. At the same time the PCT would calculate the employers superannuation contributions for the GP's and pay this direct to the NHS pension agency. As the PCT dealt with the GP's employer's superannuation contributions directly, practices have never had to budget for this cost before.

Under the new contract practices will need to consider the impact of paying the GP's own superannuation and the GP's employer's superannuation contributions out of their funding. The example (see below) illustrates the funding for one quarter and the total for the year together with the deduction for the GP's own and employer's superannuation contributions. The amount of superannuation included in the example is estimated based on the superannuation, which was paid for the Dec 2003 quarter. From the example this practice would pay about £54,600 per annum out of their gross funding for superannuation, if some GP's are also paying added years then this amount will be higher.

The employer's superannuation is going to increase from 1st April 2004 from 7% to 14%. There will be an adjustment to the global sum to take account of the rise in employer contributions, (this has not yet been agreed). In the example employers superannuation has been calculated based on 7% as the amount of the global sum includes employer's superannuation at 7%. Once it has been announced what the adjustment will be to take account of the increase in employer's contributions, practice will need to recalculate the employers superannuation at 14% to see the effect on their income.

It has been predicated that GP's superannuable income will increase with the change under the new contract that superannuable income will based on NHS profits (definition of NHS profits still to be agreed). If this is the case then practices could find that more of their funding will be spent on the GP's own and employer superannuation contributions.

The way that superannuation is paid is also changing. Practices will be required to make payments on account for the GP's own and employer's contributions. Practices will need to agree with their PCT the amount that represents a reasonable approximation of superannuation. PCT will then deduct this from practices global sum monthly payment (GSMP).

At the end of the year the practice will calculate each GP's superannuable income and forward these details to the PCT in the required format. Once the GP's superannauble income has been agreed then the PCT will need to calculate the total amount of superannuation for the GP's own contribution and employer's contributions. The PCT will need to calculate whether there is a balance of contributions, which will need to be paid, and this balance will be deducted from any payment to the practice or the PCT could request that the practice pay the balance if a deduction cannot be made.