Are the potential NHS contract changes prompting you to re-think your options?

dentist considering pension optionsAn impending new NHS dental contract in England, coupled with dissatisfaction at recent increases to UDA thresholds, could prompt some NHS dentists to accelerate a move to private practice or consider early retirement. Michael Copeland at Wesleyan Financial Services discusses key factors those thinking about making these moves will need to keep in mind when it comes to their personal finances.

In late March 2021, NHS England committed to making changes to the NHS dental contract by April 2022.

The structure of NHS dental contracts has been a matter of ongoing concern within the sector. Some dentists are frustrated with the current target-based system of units of dental activity (UDAs). They believe these fail to reflect the realities of frontline care.

While details of the new contract are yet to be confirmed, the overall concern of having to work harder for less and the risk, therefore, of having to compromise on standards of care for patients or personal health of the dentist is causing dentists to be discontent with the NHS and uncertain about their future within it.

New contract implications

Dentists that we speak to also have concerns that any new contract could limit their opportunities to upskill. Instead it will keep them on a dental care ‘treadmill’, with little opportunity to expand their areas of practice.

The new contract could move away from a reliance on the current system of UDAs. However, there is a fear that any new system could make performance appraisal far more subjective. In turn, making it potentially punitive for practices that are deemed not to be delivering on their contractual obligations.

The prospect of a new contract on these grounds is causing some practitioners to reconsider their position within the profession. Especially when combined with frustration at a recent move by NHS England to raise the UDA threshold practices must meet to avoid clawback from 45% of pre-COVID levels to 60%.

Some may think about moving away from NHS practice, or accelerating plans to become wholly private. Meanwhile, others could think about leaving altogether by bringing forward their retirement date.

Moving to private practice or taking an early retirement both have implications for dentists’ personal finances. These are factors dentists will need to carefully consider.

As dentists weigh up their next steps, here are some key things they should keep in mind:

NHS pension – replacing lost value

A key consideration for any dentist moving from NHS or mixed practice wholly to private is their NHS pension.

The NHS Pension Scheme (NHSPS) is a great value offering. Replacing its pension income alone is expensive.

But its value goes well beyond its core pension element.

Practitioners will also need to consider how they will replace additional benefits included in the plan. From spousal benefits to death in service and ill-health benefits.

This full package is costly to emulate. It can require significant planning to rebuild separately. Factoring this cost – and time – into plans to leave NHS practice is essential.

Speaking to a financial consultant who understands the NHSPS structure and what is available on the private market can help you assess what you need and the best options for you.

Retiring early – the financial considerations

Retiring earlier than planned also comes with a suite of factors to manage.

Bringing forward a retirement date will naturally mean dentists need to re-visit and adjust their existing retirement strategy. Less time to accrue pension growth can mean dentists will have less money available at retirement than they might have otherwise planned for.

Practitioners will also need to be aware of the risk of incurring potentially significant actuarial reductions on their NHSPS savings if they access them before their normal pension age (NPA).

Their NPA will vary depending on which section of the NHSPS scheme they are in; the 1995 section, the 2008 section or the 2015 scheme.

Understanding how this will affect you is key. Again, your financial consultant will help you determine what the impact of accessing pension savings early will be for you, and review alternative income options.

Factoring in assets

Those that have an equity stake in or own their practice will need to ensure they have a plan in place for the business as they retire.

If a dentist owns both their property and an NHS contract, they’ll need to decide whether to sell just the building, or both together.

If dentists plan on selling their practice as part of their retirement, it is important to ensure that their accounts are in a good position for a sale. Factor in the time it could take to complete the transaction as part of revised retirement plans.

Dentists will also need to think about simple but fundamental elements, such as who they will sell to – be it an associate or another business. Consider the possibility that a buyer might require them to agree to a retention clause.

This could tie them into continuing to work at the practice for a period post-sale. This will impact when they can realistically hang up their scrubs for good.

If frustrations over current NHS contract arrangements and concern over the nature of a new contract are prompting you to re-think your future in NHS practice or consider an earlier retirement than you had previously planned, it is essential you consider the financial implications of whatever you choose to do next.

At Wesleyan Financial Services, we understand the unique financial needs of dentists.

Our specialist financial consultants are available and can offer advice as you explore your options.

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