Leaving the NHS and moving to private practice, whether partially or fully, is a big career change.
But it’s one that many may be considering given the events of the past 18 months. It’s been more than a year since practices reopened following the first lockdown and dentists are still working within SOPs, while the activity required to fulfil contracts continues to rise.
And, of course, there remains uncertainty about what any reformed NHS contract will look like, especially since, as the country begins to recover from COVID-19, the Government’s priorities will likely be focused on other areas of healthcare.
If you’re one of those dentists who has used this time to take stock and consider a different future for you and your practice, there’s a raft of factors to consider to make sure it’s the right move.
Often one of the biggest factors for consideration is the question of what will happen to your NHS pension if you leave the service? That’s wholly understandable and in this blog, I’ll give you some key information to help answer that question.
The NHS contract allows dentists, as self-employed professionals, access to what is essentially an occupational pension scheme alongside a range of benefits such as sick pay and death in service payments.
The NHS Pension Scheme provides a guaranteed income for the rest of your life, and in the event of your death to your dependents, that is increased annually to protect it against inflation. This is particularly important to remember when you decide to leave the NHS, as it means you won’t lose the pension you have accrued – it simply means that when you decide to leave, you won’t be paying into this scheme anymore or accruing new benefits.
No doubt, your NHS pension is an important element of the decision-making process when you’re thinking of moving to private.
But, to make the right decision, either way, you need to be well-informed and consider all the facts about your pension, plus the ways in which you can replace those benefits should you choose to leave the NHS. And, of course, whether the change to the way you work and your work/life balance would make such a move worthwhile in other ways.
To help you in your deliberations, we’ve put together some key information about the NHS pension that is worth considering:
You might have a protected retirement
If you’ve been a member of the NHS Pension Scheme since April 2006 then you may have a protected minimum retirement age of 50.
Your retirement age might increase
The standard retirement age for the NHS Pension Scheme has gone up in recent years, from 60 to 65, then again to match the State Retirement Age (currently 66 but rising to 67 in 2028). The minimum retirement age increased to 55 (for new members) from April 2006, and now there is legislation on the cards to increase it to track 10 years behind the State Retirement Age from 2028, meaning at that point your minimum retirement age will be 57 and potentially rising after that. With increasing life expectancy and the debt created by the pandemic it would not be a surprise to see the State Retirement Age continue to increase after 2028, and indeed it is already expected (but not yet confirmed) to rise to 68 in 2035.
It’s worth noting that this is just the age at which you can access your pension. You are able to retire as soon as you have enough money to meet your standard of living requirements (including holidays) so these could be met through other means (savings or selling your practice etc.), that’s why it is best to sit with a Specialist Financial Adviser to ensure you have the most efficient plan for retiring (in addition to your NHS Pension).
You won’t lose your pension pot, but will miss out on some benefits
If you leave the NHS and go private, you haven't lost your pension scheme. Everything that you've built up and accrued is still there and will stay safe in a pot until you retire, increasing annually by CPI. However, you will lose certain benefits, such as the additional 1.5% annual increase added to CPI that you enjoy as an active member.
Incorporation can help to replace some benefits
If you’re an incorporated dentist and move into private practice, you can replace the NHS pension scheme income by paying your pension through the company. By doing that, you can save around 19% corporation tax and around 32 – 38% of dividend tax.
You can defer your benefits
You can defer your NHS benefits at any point. If you stop paying your contributions, after 12 months your NHS benefits will automatically become deferred. By moving to 100% private dentistry, you will naturally defer out of the NHS pension scheme because you don't have any choice to stay in it. Deferring your benefits will change the life cover and sick pay benefits that you have through the scheme. However, it’s worth highlighting that other options exist and, should you choose to move to private, Wesleyan Financial Services is able to provide replacement products to give you and your family financial protection. If you’d like more information, you can also read this blog to find out the answers to some of the common questions we receive from dentists about the NHS pension scheme.
Or, you can speak to an expert about your options when it comes to planning for retirement and how you could move to private without losing your NHS pension benefits. Book a no-obligation financial review with a Specialist Financial Adviser from Wesleyan Financial Services.