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GPs win High Court ruling on dynamising factors

 

The Dept of Health has finally conceded in its battle with the BMA over the decision of the then Health Secretary Patricia Hewitt in 2006. The Judge ruled that the Health Secretary behaved unlawfully when she announced she was retrospectively changing the previously agreed formula for calculating dynamising factors under the new GMS contract negotiated back in 2003. The hearing took place over two days 12th &13th March at the High Court. The BMA was awarded its legal costs.

What is dynamising?

GPs’ pensions are calculated by adding each year’s dynamised (uprated) superannuable income together and multiplying it by 1.4%. Dynamising is a factor (DF) applied to each year’s earnings to take them up to a current value. For example, the factor for 1980 is currently 5.273, so a GP with actual earnings of £19,727 in 1980 would equate to £104,020.47 in today’s terms.

Under the terms of the new contract is was agreed that as GPs’ incomes are likely to rise significantly over the period 2003 to 2006 and as the formula for calculating is directly linked to the increase in income over the previous year, then the DFs for that period are also likely to be significant.

What was changed?

The original agreement was to increase all GPs’ accrued pension benefits to date by applying a dynamising factor over 3 years (31.3.2003 to 31.3.2006) by the same figure that average profits increased by over that period. This was estimated at the time by the GPC to be in the region of 46% to 56%. This meant those retiring from 1.4.2006 would be the biggest winners as they would see massive increases in their pensions in the same region i.e. between 46% and 56%. Those not retiring for many years will still benefit from this enhancement.

In 2006 the DoH changed this to a 5 year time scale (31.3.2003 to 31.3.2008) and imposed their own dynamising factors (DF) of:-

2004/5             6.9%

2005/6             7.3%

2006/7             6.9%

2007/8             6.9%

These, when added to the already published figure for 2003/04 of  12.9% made a total of 48% over 5 years instead of 3.

A lot of GPs had already retired or were about to, based upon the original information, therefore they had “the rug pulled from beneath them” !

The years 04 to 08 DF’s will now have to be recalculated based upon the original formula i.e. the difference (nationally) in GP’s earnings between the year in question and the previous year.

When will the revised dynamising factors be known?

Certainly 04/05, 05/06 and 06/07 figures should be available shortly as the increase in earnings over these periods are known, 07/08 however won’t be known for at least another 12 months.

What difference does the 3 year time scale make?

For those not yet retired it simply means an extra 2 years of dynamising will now take place, which would not have happened if the ruling went against GPs. For those already retired the actual amounts involved are hard to quantify as the 2004/2005 dynamising figure has yet to be calculated let alone subsequent years. It is estimated however that the increase will be in the region of  15% to 20%.

Who are the main winners and losers from the High Court ruling?

There are no losers and all GPs that are pre-retirement members of the NHSPS between 2003 and 2006 are winners. The main winners are those GPs that retired after 31.3.2006 with large pensions as they will now be retrospectively increased to compensate for the unlawful change imposed. The amounts involved will depend upon the pension being received, therefore the increase can be in the region of a few hundred pounds per annum up to potentially thousands of pounds per annum for those on the largest pension. In addition a lump sum of 5 times the pension (3 times as per scheme rules plus making good the last 2 years) will be payable.

I retired in April 2006, when will I know and how much extra will I get?

That’s hard to tell at the moment but the Technical Steering Committee have already got most of the information they need to publish the proper dynamising factors so it should be a matter of weeks. The actual process of increasing the pensions of those that have already retired may take longer.

The amounts involved are obviously directly linked to the amount of pension already received. If we take an example of  a GP who retired April 2006 on a pension of £50,000 pa. The manipulated dynamising factor (DF) for 03-06 was 29.5% and assuming the increased or actual factor turns out to be nearer  50+% as estimated by the BMA then the £50,000 pension will be increased to £57,692 pa plus a lump sum of £38,460 (plus interest?).

I don’t retire until 2013 will I benefit from this decision?

Yes all GPs that did not retire before April 2004 will benefit. Those closest to retirement will benefit the most, younger GPs less so.