You have spent your entire working life building up your Practice, as well as a huge amount of goodwill to go with it. Although you aren’t quite ready to hang up your drill just yet, you do want to start claiming your NHS Pension. What do you need to do?
Unfortunately, as with most NHS processes, the procedure is quite cumbersome and protracted. Accordingly, if this is something you are considering, should raise this with a member of our dental team 6 months to a year prior to the date on which you wish to receive your pension, to assist you with the various hurdles that stand in the way of you and your NHS pension.
There are two main obstacles to overcome. Firstly, the NHS practitioner must retire from the NHS Contract and cease to work for the NHS, and as such, cease to provide NHS dental services for a minimum of 24 hours, hence the phrase “24 hour retirement”. Secondly, the NHS practitioner cannot work for more than 16 hours per week in the month immediately following his or her “retirement”. This second point should be borne in mind when choosing a “retirement date”, particularly if it is nearing the end of the NHS Year and you are underperforming on your NHS Contract.
This is of particular concern to dentists who hold their NHS Contract in their sole name, as if they were simply to retire from their NHS Contract, this would have the effect of bringing the NHS Contract to an end and destroying the Practice.
The solution proposed is for the NHS Contractor to enter into Partnership with another dentist in relation to the NHS Contract, so that, upon the Contractor’s 24 hour retirement, the NHS Contract will remain in force, in the new Partner’s sole name, as permitted under clause 298 of the NHS Contract.
And because an NHS Contract cannot be in the sole name of a dental care professional who is not a dentist, the Partner must be a dentist.
That is not to say that the dental care professional cannot be a partner with you on the NHS Contract, but that is a different debate relating more to equalisation of revenue for tax purposes, rather than NHS Contract protection.
So you need to pick a friendly dentist to act as your notional Partner. And to overcome the risk of the new Partner treating the NHS Contract as his or her own, the new Partner would enter into a Declaration of Trust.
This is a document that spells out the fact that the new Partner holds his or her interest in the NHS Contract on trust for you, and that he or she must only deal with the NHS Contract in accordance with your directions or, following your death, in accordance with the directions of your executors.
For the same reason, a Declaration of Trust should also be entered into, where you appoint a partner for the purposes of 24 hour retirement.
Of course, there is the risk that the new Partner does not co-operate, regardless of what the documentation states, in which event and in a worst case scenario, the Contractor would need to litigate. This is extremely unlikely, particularly where the new Partner is a friend. There are certain additional steps that the Contractor may wish to take in order to mitigate this risk further. For instance, the Contractor may wish to consider requiring the new Partner to hand over a signed but undated retirement notice, which the Contractor can hold on to, and submit to NHS England should any issues arise in the future.
There is also an element of risk to the new Partner in entering into the NHS Contract Partnership, and it is important that the new Partner understands the nature and extent of the risk from the outset.
In relation to the NHS Contract, the new Partner would not only share the legal (but not actual) right to monies payable under the Contract, but he or she would also share legal liabilities to the NHS arising under the Contract. For example, if a clawback liability arises, the Contractor and the new Partner would be jointly and severally liable for the repayment, i.e they could look to seek any sums owed from both of you jointly, or just one of you alone. That said, clawback is usually taken from future payments and rarely paid out in cash.
If it were required to be paid in cash, the Contractor would pay it in practice and, if the Contractor failed to do so, the new Partner could rely on the commitment made by the Contractor in the Declaration of Trust, to meet such liabilities and to indemnify him or her to the extent that he or she is called on to meet the liability. It follows that the only real risk to the new Partner is where the liability arises and it turns out that the Contractor is bankrupt and so the new Partner is fixed with the liability himself. Dead and bankrupt dentists are a rare breed!
If the new Partner is only staying on the NHS Contract for 24 hours, the above issues are unlikely ever to be an issue, although as mentioned a little later in this article, there are advantages to sole Contractors continuing this protective arrangement indefinitely.
This protective Partnership is achieved via two documents. Firstly the Contractor must send an official notification (in accordance with the Contractor’s NHS Contract) to the NHS, informing it that the Contractor is going into Partnership in relation to the NHS Contract. The second key document is the Declaration of Trust. The document essentially says that the Partner is merely a figurehead, not entitled to revenue and not liable for liabilities. Obviously, the Partner does not acquire any capital interest in the Contract or role in the Practice.
The whole process from instructing solicitors to receiving your first pension instalment or lump sum is likely to take between 4 and 6 months. This is because the Contractor cannot submit the “NHS BSA Pensions – Retirement Benefits Claim Form” (Form AW8) to NHS BSA (Dental Services), requesting to drawdown your pension, until the new Partner has been added to your NHS Contract, and your 24 hour retirement date has been agreed with the NHS England.
And NHS England won’t place your NHS Contract in to your and the new Partner’s joint names without the CQC confirming that they will place the Practice’s CQC registration into your joint names. The CQC usually take 10 to 12 weeks to process an application for such consent, and then once the CQC paperwork is through, we need to provide NHS England with a minimum of 28 days’ notice, before they will vary the NHS Contract. NHS England also often insist on the changes only being effective on the 1st of the month, following the expiry of the 28 days’ notice.
And it is only once the above is dealt with, that you can submit the forms to NHS BSA (Dental Services) confirming your 24 hour retirement date. NHS BSA (Dental Services) then need to complete their part of the AW8 Form, and forward it on to NHS Pensions, who in turn state that they need at least 3 months’ notice of the proposed pension drawdown date. Although they often agree to back date the payments to the “retirement date”. Let’s hope you don’t die before you complete this tortuous process!!
Sole NHS Contractor clients are often unaware of the effect that their death will have on their NHS Contract, and consequently the value of the Practice they are leaving to their family under their Will.
When initially issued back in 2006, the NHS Contracts stated under Clause 306 that the NHS Contract would terminate 7 days following the death of a sole contractor, albeit the NHS had the discretion to delay the termination of the contract by up to 3 months. Subsequent legislation has seen NHS England extend these timeframes slightly, with more recent NHS Contracts terminating within 28 days of the Contractor’s death, with NHS England have discretion to delay the termination by a further 6 months.
NHS England even has the discretion now to redirect the NHS Contract in accordance with the wishes of the executors of the Contractor. It is however risky to rely on NHS discretion, rather than guaranteed legal rights.
It is unwise not to take every possible step to avoid the risk of the NHS Contract coming to an end and destroying the Practice. For this reason, every sole Contractor should enter into a protective partnership to eliminate this risk.
It is the same trust structure whether you are going for 24 hour retirement or seeking to avoid the risk of the NHS Contract coming to an end on death.
Why take the risk?
Stuart Nash, solicitor, Abrahams Dresden LLP
Abrahams Dresden articles and guidance notes are for general information purposes only and generally state the law as at the date of publication. The information may not be relied upon as legal advice. We are of course always happy to advise directly on specific issues arising.