GP pensions will not be uprated to take account of increases in average incomes between 2006 and 2008, the BMA has revealed.

In April the High Court ruled that then health secretary Patricia Hewitt acted unlawfully in 2006 when she retrospectively capped the 'dynamising factor', used to calculate inflationary increases in pensions, for the period 2003/6.

Increases were capped at around 45 per cent over those three years, amid fears that dramatic increases in earnings brought about by the new contract would prove too great a financial burden.

The High Court's decision to remove the cap gave GPs a more realistic increase of 59 per cent during 2003/6. However, taking the 2003/8 period as a whole, this difference of 14 per cent is set to be effectively wiped out as the ruling does not apply to the dynamising factor for 2006/8.

In a letter to the profession last week, GPC chairman Dr Laurence Buckman wrote that the health secretary plans to set dynamisation at just 1 for those years.

As a result, the compound dynamisation for the years 2003/6 will be the same as that for 2003/8.

This could cost a GP earning £100,000 and looking to retire this year £600 a year in pension payments and shave £1,800 off the lump-sum payment, according to Paul Kendall, a partner at accountancy firm Dodd and Co.

'This drop is only if there was still this 14 per cent difference,' said Mr Kendall.

'In many cases profits have fallen so it is to be expected that there will be less of a rise in recent years. The cap was brought in because rises in earning were so great in the first few years of the new contract but that has not been the case recently,' he added.

Bob Senior, vice-chairman of the Association of Independent Specialist Medical Accounts (AISMA), said GPs retiring this year could still benefit.

'Dynamisation has effectively remained static between 2006 and 2008 but crucially it hasn't gone down, whereas profits have. A dynamisation of 1 may actually protect GPs from any losses.'

GPletters@haymarket.com

PENSION LOSS

Typical pension with 14% dynamising factor for a GP earning £100,000 retiring this year.

• £32,600 a year
• £97,800 lump sum

Pension without the 14% dynamising factor.

• £32,000 a year
  £96,000 lump sum

Source: Dodd and Co.

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