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A guide to retiring for associates and principals

By Rob Lowe, Financial Consultant at Wesleyan Financial Services

A guide to retiring for associates and principals

A happy retirement is your well-deserved reward for many years of working hard and helping patients.

Whatever your specific plans are for retirement, preparing for it in advance and understanding your options can help you achieve your post-work dreams and enjoy it as much as possible.

In this blog we'll look at how you can effectively plan and prepare for retirement, and what you need to consider if you're an associate or a principal.

24-hour retirement rule

If you work in the NHS, regardless of if you're an associate or principal, you'll need to know about this rule.
This rule is the process that the NHS has put in place for when you move into a retirement phase and start to draw your NHS pension.

There are two parts to the rule:

  • The dentist has to physically give up their NHS contract for at least 24 hours. Many people do this over a weekend, so they effectively retire on Friday and go back on Monday.
  • You can't complete more than 16 hours of NHS work for the first month after the pension becomes payable.

Considerations for associates

Whether you're looking to retire fully all at once, or just partially and become semi-retired or take a phased approach by gradually reducing your hours over time, as an associate there are some things you need to consider.

It's wise to start thinking about accessing your pensions three to six months before you want to retire.

This will give you time to complete the relatively time-consuming admin associated with accessing your funds, especially when it comes to the NHS pension. You can also use that time to think carefully about what you want to achieve by retiring and seek any financial advice that can help to fulfil those plans.

Before retirement, you'll also need to liaise with your principal, especially if you're fully retiring, as you'll need to work out the details of your notice period, which is usually three months in most dental contracts.

If you're intending to access your NHS pension, you'll also need to factor in how you will adhere to the NHS 24-hour retirement rules as outlined above.

If there are any issues around under-performance of UDAs, you'll need to discuss with your principal how these will be delivered, especially if you were planning on gradually reducing your working days before retiring.

Having these kinds of discussions early on can avoid any frustrations, such as disagreements between how many days you want to work, or delays later down the line.

Considerations for principals

Similar to associates, it's worthwhile spending a few months making sure you have everything in place before you actually start applying for your pensions.

You also need to consider how your business structure may affect what you need to do before you retire, e.g. there will be different responsibilities and administrative tasks depending on whether you're a sole trader, a partnership, or a limited company.

For example, if you have a cost sharing or partnership agreement, it's vital to review these and familiarise yourself with what you need to do. You'll need to make sure that your key person protection is in place and up-to-date.

If you're in a partnership and changing your hours, you'll need to consider how the income will be distributed differently.

Whereas, if you're operating as a limited company, you'll need to look at your shareholder agreements and how any retained profits in the practice would be distributed to the director.

You need to think about how any under-performance of UDAs and claw-back could affect any plans you may have to sell your practice, especially if this is one of the ways you intend to fund your retirement.

You'll also need to consider how the 24-hour retirement rule can impact your business i.e. whether you will need a locum to cover that period or if you can manage it through annual leave.

If you're planning to reduce your hours in the run up to retirement, make sure you communicate your plans with your team and your patients, to help smooth the transition.

If you have patients on a plan, contact your membership plan provider early and begin looking at how to start gradually transferring your patient list to other areas in the business.

Start talking to your key business partners - accountants, membership plan providers etc., as early as possible so that they can support you in creating and executing a robust exit strategy. Ideally these conversations would begin three to five years before you plan to retire, especially if you are going to sell your practice as that would allow for measures to increase goodwill value and profits.

How do I know if I'm ready to retire?

Whether you're an associate or a principal, it's worthwhile seeking expert advice from financial advisors, such as those based at Wesleyan Financial Services, who can relieve some of the administrative burden and time pressure of this kind of planning.

At Wesleyan Financial Services we can look at your current position, examine your income and expenditure and create a package of recommendations that will suit your specific needs for retirement.

This can help you to understand whether you're ready to retire straight away or if there are some steps that would be worth taking, such as paying off education fees or more of your mortgage, that will put you in an even better position to achieve your goals.

If you seek this kind of advice, it's wise to do some homework yourself first. For example, get up-to-date pension and investment statements, have your total rewards statement to hand, and understand how much debt you've got, such as, mortgages, loans, credit cards.

The more detailed and accurate information you have, the simpler it will be to put together a plan that allows you to enjoy retirement to the full.

If you're ready to begin planning for your retirement, you can book a 30-minute quick start no-obligation chat with a Wesleyan Financial Services Consultant or call: 0800 316 3784.

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