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Written by Iain Stevenson, Head of Dental at Wesleyan Financial Services

Cost-of-living crisis – three ramifications for dentists

4 min read
Man sitting at desk with laptop on phone

Iain Stevenson, Head of Dental at Wesleyan Financial Services, shares his insights on how soaring inflation and energy rates may impact dentists in the near future…

On top of industry pressures that you face in dentistry, such as the looming NHS contract reform, increasing treatment targets and restrictive COVID-19 infection prevention and control procedures, the last thing needed is additional pressures from a turbulent financial landscape.

We’re currently facing an amplified cost-of-living crisis, spurred on by a rise in cost for transport, fuel and a large leap in energy prices. In fact, the consumer price index hit its highest level in 30 years in December and has increased further to hit 5.7% at the start of February.

Many would assume this only affects the lower income households, but the reality is that there are very tangible impacts for members of the dental profession, both from a personal finance perspective and for those who own their own dental practices.

Here are the top areas for consideration:

Impact of inflation and erosion of savings

Inflation is expected to hit 7.25% by April this year, which is more than triple the Bank of England’s target of 2%. What this means for those who have large funds sitting within savings accounts (or business accounts) is that their savings are at serious risk of being eroded by inflation over time.

The Bank of England has nudged up its interest rate today again following the initial increase in December to help combat inflation. However, most people won’t have noticed a positive impact on their finances, especially with UK wage growth slowing and rising energy and food prices.

The best easy-access savings rate on the market is currently at 0.71% and it is possible to obtain a rate of 2.2% if you’re willing to lock your cash away for five years, which won’t stack up against inflation should it reach 7.25%.*

Many dental professionals we support at Wesleyan Financial Services have a surplus of savings, due to the nature of income that dental professionals receive.

To protect your wealth, one way to overcome this particular financial hurdle is to think about other ways you can make use of your savings. The money you hold onto as cash, slowly loses its buying power due to inflation. However, by investing, you can expect to achieve higher returns over time, with the aim of at least beating inflation.

You won’t have easy access to your money during the investment period, but it could help put you in a better position to ride out the storm and retain as much wealth as possible, particularly with a long-term approach. Of course, it is worth remembering that investing needs to be in line with your risk appetite and it is a possibility you may get back less than you invest.

Increased pressure on dental businesses

This is an area that is particularly vulnerable to the cost-of-living crisis with a lot of moving parts.

The end of furlough, coronavirus loan repayments, higher utility bills, prospect of paying the additional 1.25% Health and Social Care Levy on employees from April this year, potentially lower NHS contract income due to abatement etc. – all combines to negatively impact cashflow.

Diversifying income streams, potentially by specialising in certain treatments and procedures or, if you are in the NHS, considering your options within private dentistry could help you strengthen your practice’s financial foundation.

Similarly, when thinking of investing your personal finances, it’s also worth considering investing surplus funds that may be sitting in a business bank account to protect the fund from losing its value.

What does the crisis mean for your retirement plans?

If you’ve worked out what you need to retire on based on 2% inflation as an example, how much more will you need to save to retain the same standard of living if inflation remains above that level for a sustained period of time? How much harder would your investments need to work?
These are the questions you need answers to, in order to secure your retirement plan from derailment during this type of economic turbulence. 

Speak to a specialist

There’s a lot going on in the dental landscape that may affect your financial position and planning for the future.

If you’d like further advice on how to overcome upcoming challenges and create a projection for your retirement and savings, you can speak to a Specialist Financial Adviser from Wesleyan Financial Services as part of a no-obligation financial review.

* Correct at time of publication, rates may vary over time.

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