Peter McKenzie, specialist dental financial adviser at Wesleyan Financial Services, shares how half an hour of professional financial advice can help you fast-track your retirement plans.
Dentists in Scotland might feel like many financial elements are out of their control due to a reduction in financial support from the NHS and concerns around the ever-increasing cost of living.
One way to gain peace of mind with your finances is to take back control of your work and retirement planning. A crucial point to this is that the younger you start, the less of an impact it’s going to have on your outgoings, and the more likely it is you will be able to retire early without having to make compromises on your lifestyle.
Also, you will have longer to grow a pot of tax-efficient savings ready for life after setting down the loupes.
During an initial meeting with an adviser, particularly a specialist who’s worth their salt when it comes to the complexities of a career in dentistry and the workings of the NHS pension scheme, one area they’ll add value is by bringing clarity as to where you are on your road to retirement.
Bridging the early retirement gap
When sitting down with an adviser, one fundamental consideration for dentists’ retirement plans, particularly for those who would like to retire before the normal retirement age, is to close a pension gap that applies to those who predominantly work for the NHS.
Many dentists will have some form of NHS pension that they will contribute to or that will be accruing in the background after converting to private provision. For those who are relying on an NHS pension in retirement, the normal pension age depends on which part of the scheme you reside in.
The minimum normal retirement age for members of the 2015 scheme, which will apply to many dentists who are in the early stages of their career, is currently 65 but is set to increase to 67 in 2028 in line with the state retirement age. While you can take your NHS pension benefits from a minimum age of 55, you will face an actuarial reduction that could impact your retirement lifestyle if relied on as the sole provision.
The Pension and Lifetime Savings Association recommend that, for a ‘comfortable’ lifestyle, a single person needs £33,600 per annum. However, as higher earners, dentists may want more freedom and flexibility in retirement than this provides. One target to consider would be £49,700 a year, to keep you under the higher tax rate threshold.
Unique journey
Calculating the impacts of early retirement is no mean feat for dentists – as self-employed professionals, each dentist’s retirement journey is unique. However, for illustrative purposes, let’s use an example of a 28-year-old associate dentist on £70,000 a year, looking to retire at 60.
Should that dentist retire at 60 and immediately begin taking their NHS pension benefits, due to the actuarial reduction, they can only expect to receive around £35,095 per annum. Instead, should they leave the scheme at 60 but not take the benefits until 67, they could receive £52,536 per annum. Bear in mind, this is the buying power of the pension in today’s terms and does not take into account inflation.
Imagine having a further £17,441 per year to enjoy in this next life stage.
This is where personal pensions bolster a dentist’s overall retirement plan, filling the gap between ages 60 to 67, and allowing your NHS pension more time to mature. As mentioned before, every dentist’s retirement journey is unique, so the personal provisions you might need to put into place may be different than your colleagues. Unfortunately, no one size fits all.
These example calculations tend to be eye-opening, but there are steps you can put in place to help you achieve that early retirement dream without sacrificing your pension’s value either to actuarial reductions or higher rate tax payments.
Tools to tap into
If you want a clearer steer on your NHS pension and the benefits you currently hold, Scottish NHS dentists can access their pension statement via the Scottish Public Pensions Agency.
For further clarity, you can get advice from experts who can help you achieve your goals.
You can book a no-obligation financial health check with a specialist financial adviser to run through your unique retirement position and begin putting the steps in place to help you achieve early retirement. Visit www.wesleyan.co.uk/dental or call 0800 316 3784.
Please note: Tax treatment depends on 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.
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
