Superannuation Annual Reconciliation

Superannuation Annual Reconciliation

It’s that time of year again.  The 30th June deadline for submission of the Annual Reconciliation Report (ARR) is approaching and we thought it would be useful to remind you of the recommended approach to calculating your Net Pensionable Earnings (NPE) figures.  For contract holders this should help you ensure everyone has the correct NPE for the 18/19 year and for Associate dentists this will assist you in making sure your superannuation contributions for the year are accurate.

Over the years there have been various methods used to calculate the NPE for each performer and you will no doubt come across a variety of approaches when speaking to different practitioners.  The NHSBSA have left it to the discretion of the contract holder to decide which approach is used and whichever method is applied it must be agreed between the contract holder and the performers in advance of the ARR submission.  The approach we recommend is as follows:

  1. Multiply the total contract value for the year by 43.9%. This will give you the “NPE ceiling” or in other words this is the total amount of NPE  that the contract affords and is available to be distributed between all performers (including those who are not making Superannuation contributions which we will come to later).

Example: Let’s say the contract was for £227,790 so the NPE ceiling is £227,790 x  43.9% = £100,000.

  1. For each Associate performer their NPE (or NPEE for limited companies and opted out dentists) is equal to total NHS pay less deductions for laboratory costs.

Example:  So if there are 2 associate performers each paid £10 per UDA, completing 3,000 UDAs in the year and their 50% share of Lab fees was £2,000 their NPE would equal (£10 x 3,000UDAs less £2,000) £28,000 each

  1. Once the NPE (or NPEE) has been calculated for all associate performance the quantum of these NPE figures is deducted from the NPE ceiling. What is left is the NPE available to the contract holder.

Example:  So if the ceiling is £100,000 and each performer claims £28,000 NPE (£100,000 – £28,000 – £28,000) there is £44,000 left for the principal to claim as NPE

For any associates trading through a limited company the Superannuation scheme is not available, however their Net Pensionable Earnings Equivalent (NPEE) must be calculated and included in the above calculations.   This potential superannuation contribution is simply lost.  The same is true for those Associates who have opted out or those who have reached their maximum contribution limit.

Finally if the contract is held by the principal’s limited company then the maximum NPE that can be claimed by him or her  is equal to the Salary and Dividends that have been drawn from the company in the year to 31st March.

Example:  If our company owner draws £8,000 in salary and £25,000 in dividends the total NPE claimable would be (£8,000 + £25,000) £33,000.  The remaining £11,000 NPE would be lost.

Once the NPE has been entered on the ARR a % is applied to that amount (ranging from 5% to 14.5%) to calculate how much the superannuation contribution for the year should have been.  This is then compared to what was deducted in the year and a correction is applied for each provider on the July pay statement.  This figure is also used to calculate your monthly deductions for the coming year (to be corrected in the same way in July 2020).

For further information the NHS Business Service  Authorities have provided useful guides that can be found on their website:

https://www.nhsbsa.nhs.uk/provider-and-performer-pensions/annual-reconciliation-report-process-arr

Should you require any assistance with the ARR or have any other queries related to your superannuation calculations contact our team.

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