Four financial considerations when thinking about leaving the NHS
Gordon McMillan, specialist dental financial adviser at Wesleyan Financial Services, shares key factors to think about to stay on solid financial footing when considering going private.
Dentistry has always been a fast-paced profession. But even by its standards the pace of change has accelerated massively over the past two years, perhaps especially within the NHS.
Much of this has been driven by the fallout of both Brexit and Covid-19. This has led to many challenges. For example, the recruitment and retention of dental professionals that is widening the imbalance in the supply and demand of dentistry.
For many, trying to overcome these difficulties has become too much and they’re voting with their feet; practice owners are choosing to become mixed or fully private, while many associates are being tempted to leave their NHS roles and go into a private practice.
We’re hearing more and more anecdotes about these scenarios, but it’s also backed up by statistics. The recent Dentistry Census revealed that 73% of dentists anticipate doing less NHS dentistry in the coming two years and 84% anticipate doing more private dentistry in the next 12 months.
If you’re one of those who is thinking of making a move to private dentistry, it’s important to get all your ducks in a row first. Make sure you understand the financial implications, both personally and professionally.
To help you do that, I’ve shared four key considerations to think about below:
Becoming a limited company
Moving from NHS to private can give you more options in terms of how you operate. There’s the possibility to explore changing your trading structure and becoming a limited company which has different tax benefits to working as sole trader or partnership.
It’s important to consider that going down the route of incorporation may mean refinancing any business loans on your practice.
While lenders do tend to see NHS practices as a safe pair of hands due to the consistent income, there are ways to replicate that in a private practice. For example, by introducing a membership plan – which brings me nicely onto my next point.
How can I replace my guaranteed NHS income?
The worry over losing the consistent income that comes with being part of the NHS is a common concern for those who are considering leaving.
One way to move to private and still have financial security is the use of membership plan providers. There are even providers in the market that will support you behind the scenes while helping you grow your brand like Practice Plan.
By introducing a plan into your practice when you move private, you will still have that guaranteed monthly income. Not only that, you’ll have the support of a provider. They would have helped others make the same move and can help you to mitigate any risks.
Whether you decide to offer the plan to some of your patients, all of them, or make it your default position, it can help you to smooth out the peaks and troughs that can come with a pay-as-you-go approach.
But as well as a stable cash flow, plans could result in patients attending more regularly. It could encourage them to take a more active role in their oral health, and support a preventative approach to delivering dental care.
The impact on your goodwill value
There has been a quarterly increase in goodwill values as a percentage of fee income across all types of practice, according to NASDAL.
Statistics for the quarter up to January 2022 showed the highest increase in private practices with the lowest in NHS practices. Alan Suggett, specialist dental accountant and partner in UNW LLP who compile the figures, described the practice sales market as resilient and continuing in its upturn.
However, he noted that ‘it’s becoming clear – at least anecdotally – that there’s less enthusiasm for NHS practices at this time’.
The goodwill figures for each type of practice were as follows:
- Private practices – 155%, compared to 132% in the previous quarter
- Mixed practices – 189%, compared to 179% in the previous quarter
- NHS practices – 141%, compared to 139% in the previous quarter.
How your NHS pension is affected and how that can be mitigated
It’s important to understand your current benefits and how they will look if you reduce or eliminate your NHS work. For example, if you lessen your NHS commitment, you will still remain part of the NHS Pension Scheme. But you’ll become a deferred member. This means that your pension pot will still accrue with inflation, but not at the same level as before.
Accessing your Total Reward Statement and your net pension earnable figures via Compass is a good place to start if you’re considering going fully or partially private.
These will help you to see how much you’ve accrued so far. It will also show you how that will be impacted if you taper down or eliminate your NHS work. It also highlights how other benefits that come with working under the NHS can be affected. For example, sick pay and the death in service grant.
When it comes to replacing your sick pay benefit, you can use an income protection plan. If you already have a plan in place, it’s worthwhile checking that it will still fit your requirements if you’re no longer in the NHS, ie if it doesn’t commence for the 26 weeks that you would previously have been covered by the NHS pension, it’s probably not going to be that helpful.
Private pensions can replicate these kinds of benefits as well. They just may not have the same level of guarantee that you have under the NHS.
Speaking to a specialist financial adviser can help you to understand where you stand now and what your options are, so that you can make well-informed decisions about your financial future.
Tax treatment depends on the individual circumstances and may be subject to change in future.
Advice is provided by Wesleyan Financial Services Ltd.
‘WESLEYAN’ is a trading name of the Wesleyan Group of companies.
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