A guide to dentists’ finances, part two
Part 2: Performers
By the time you reach the level of Performer, your career will be well on track and your earnings will have increased significantly. Your personal and professional commitments are likely to have changed considerably since you qualified, and you may now be looking to start a family or buy a practice.
You are your biggest financial asset and, with the average salary of a performer being more than £65,000, it’s important to make sure both you and your earnings are adequately protected.
Income protection is important because it will provide you with an income if you are unable to work due to an illness or accident, typically up to 50% of your pre-incapacity earnings.
As your salary will have increased significantly since you were a foundation dentist, any plans you currently have in place may not be enough to cover your new circumstances.
It is often assumed that if a performer is unable to work, hiring a locum is the responsibility of the Principal. However, each Performer needs to be aware that responsibility for finding, referencing and hiring a locum now rests with them. Unless an alternative legally binding agreement is in place, the Principal can hire a locum and recover the costs from the Performer.
Without insurance, the cost of a locum – which can run to hundreds of pounds per day – could be deducted from the earnings of the person they are covering for.
Starting a family
At this time of life, settling down and starting a family may be on the agenda. But aside from the added expense of having a child, there is also the loss of income to contend with that comes from taking maternity leave.
Statutory Maternity Pay is paid for a maximum period of 39 weeks. For the first six weeks it is paid at 90% of your average gross weekly earnings with no upper limit, and for the remaining 33 weeks the lower of either £135.45 or 90% of your average gross weekly earnings. It is also worth checking your contract with the practice, to see if you are liable for locum cover for the time you are off work.
Looking further ahead, if you decide to send your children to private school or help them with university costs then you will be faced with even more expense. Based on current fees it could cost more than £175,000* to put a child through private education from age 5 to 18, while, the average debt on graduation for university students starting this autumn could be £53,400**.
With sums like this, it’s important to review your savings and investments portfolios to ensure they will cover the predicted costs.
Investing for the future
No matter what your goals are, when you’re saving it’s important to make your money work hard.
If you opt for shares, or equity based investments, you should be prepared to leave your money invested for at least five years. There are a variety of options available when investing in the stock market, ranging from stocks and shares ISAs to investment bonds, and it is sensible to talk to a financial adviser who will explain these and discuss which options are best for you
Buying a property
When you’re buying a home, getting the right mortgage to suit you is vital.
You will need to decide whether to opt for a fixed rate mortgage, which has a set level of interest for a specific period of time, or a variable rate. You will then need to consider how you will repay it. With a repayment mortgage, you will eventually pay off the full amount borrowed plus interest. Interest only mortgage payments are lower, but at the end of the mortgage term you will still owe the amount you originally borrowed, and lenders will insist you have the means to pay this off.
Preparing for retirement
Even though retirement will still seem a long way off when you’re in your 20s and 30s, it’s still important to think about your retirement.
As you will know, there are major changes planned to public sector pensions. While the final details have yet to be confirmed, if you are a member of the NHS Pension Scheme, it is likely that you will have to work longer and pay more for potentially lower benefits. You may need to make additional payments or alternative investments to ensure you achieve the level of retirement income you desire. However, it is still likely to be a very good scheme.
If you are concerned about how the changes will affect you, discuss your options with a financial adviser who has a detailed understanding of the NHS Pension Scheme.
* 2012 Independent Schools Council Survey
** Push.co.uk Student Debt Survey
The above information does not constitute financial advice. If you would like more information or need specialist financial advice call Wesleyan Medical Sickness, which specialises in financial services and products for dentists, on 0800 980 5462 or visit the website at www.wesleyan.co.uk/dentists.