Adam Thompson shares financial insights on what the current economic climate means for dentists’ pensions and investments for retirement.
As the cost of living crisis rumbles on and the inflation rate continues to rise, what we tend to see in the world of financial planning is that people are, understandably, most concerned with how these impacts affect their current financial situation, rather than considering the long term. This leaves people’s retirement plans vulnerable.
Retirement may be looking more and more appealing for the dental profession. This is especially true with increasing pressure to reduce patient backlogs widely being reported in the media. But with fewer resources due to the ongoing recruitment and retention crisis.
Whilst saving for retirement, you are gaining valuable tax relief from the government. Pensions can also be used for tax planning and inheritance tax planning.
When planning for retirement, factoring in the costs of living is key to achieving a retirement where you thrive rather than simply survive.
Good news for the NHS pension scheme
Inflation is a threat to the value of money we hold onto as cash. As the general value of goods and services rise, it essentially erodes the value of savings over time.
One of the many fantastic benefits of the NHS pension scheme for those practising under the NHS, and there are many benefits, is that it is fully indexed linked to protect the scheme from inflation. Your pension will be increased every year in line with the cost of living. This is great news for the current economic climate.
A double-edged sword
For balance, while the indexing of the NHS pension scheme is an overall benefit, this booming growth of the scheme can become a tax headache. Particularly when you take into account the Lifetime and Annual Allowance.
To ‘toe the line’ on this issue, dentists ideally need to seek advice on this financial planning area every year. And well ahead of the tax year-end deadline.
Personal pensions and investments
For private dentists who don’t have access to the NHS pension scheme or only have a small NHS pension accruing from previous work in the NHS, you have to make your own arrangements.
Most likely this will take the form of saving into a personal pension. Personal pensions have additional risks including investment performance and inflation.
Dentists in this scenario need to make sure a) they are saving for retirement and b) they are invested in the correct funds for their risk profile and length of time to retirement with the hope of an above-inflation return. Remember, that the value of investments can go down as well as up. You may get back less than you invest.
In retirement, their personal pensions also need to be carefully monitored to take account of the effects of inflation.
Regular reviews of your retirement assets are key to ensure your plans remain on track.
Seek advice from specialists
When it comes to the cost of living crisis, and with inflation levels as high as they are currently, the estimated amount you will need to save for retirement may need adjusting or increasing to achieve the lifestyle standard you’d like. Ask yourself – will you be happy to make sacrifices? Or do you want to have an absolute ball when you set down the loupes for good?
Look for an advice service that can provide a report with an accurate forecast of all your retirement savings, pensions and assets. Run projected scenarios for the costs of living in future. It also pays to speak to someone who can advise on complex matters such as the NHS pension scheme and the pension discrimination case.
This will help paint an accurate picture for you. Both in terms of where you currently stand and what kind of lifestyle you can expect in retirement. You’ll then be able to make any necessary adjustments to meet your retirement goal.
No obligation
At Wesleyan Financial Services, we have a team of specialist dental financial advisers who understand the peculiarities of retirement planning for the dental profession and also how the cost of living crisis needs to be addressed.
You can book a no-obligation financial review with us by visiting www.wesleyan.co.uk/dental or calling 0800 316 3784.
Advice is provided by Wesleyan Financial Services Ltd.
‘WESLEYAN’ is a trading name of the Wesleyan Group of companies.
Wesleyan Financial Services Ltd (Registered in England and Wales No. 1651212) is authorised and regulated by the Financial Conduct Authority and is wholly owned by Wesleyan Assurance Society. Wesleyan Assurance Society is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Incorporated in England and Wales by Private Act of Parliament (No. ZC145). Registered Office: Colmore Circus, Birmingham B4 6AR. Telephone: 0345 351 2352. Fax: 0121 200 2971. Calls may be recorded to help us provide, monitor, and improve our services to you.
