NHS to private dentistry: what happens to your pension?

Introduction

For many dentists, making the move from NHS dentistry to private practice is a significant career milestone. While the transition can offer several benefits, from greater clinical freedom to improved work-life balance, it’s important to understand the impact it could have on your NHS pension and wider retirement planning.

In this guide, we’ll talk through what happens to the pension you’ve already built up, what you lose when you leave active membership and ways you can continue to save for your future.

What happens to your NHS pension benefits when you go private?

When you transition from NHS dentistry to private practice, any benefits you’ve built up in the NHS Pension Scheme (NHSPS) are completely safe – even if you choose to move fully private and stop making contributions.

In fact, your pension will continue to increase in line with inflation until you reach retirement age. Remember though, without ongoing contributions, you’ll no longer be adding to your entitlement. This means the value of your benefits will only grow through inflation, rather than through new service.

Whether you choose to keep some NHS work or practice privately on a full-time basis, you’ll be able to claim your NHS pension in full when you reach the scheme’s Normal Pension Age (NPA). Your NPA will depend on which section(s) of the scheme you belong to (1995, 2008 or 2015).

Can I stay in the NHS Pension Scheme if I keep some NHS work?

If you decide to keep any NHS work, you can continue contributing to the NHS Pension Scheme. However, contributions will only apply to the portion of your income that comes directly from the NHS dentistry you do.

This means that while your NHS earnings will still build pensionable service and increase your benefits within the scheme, any income you earn from private practice will not count towards your overall NHS pension. It also means that your pension will grow at a slower rate than when you were fully NHS.

Given the reduced NHS pension accrual that comes with transitioning to private practice, many dentists opt to set up a separate pension arrangement to cover their private earnings. This mixed model approach allows you to continue building NHS pension benefits while also enjoying the financial flexibility that private practice offers.

What’s more, you’ll retain access to some of the additional advantages of active NHS pension membership, such as death in service and ill health retirement benefits - although this will be based on your lower pensionable pay.

Alternative pension options for private dentists

If you decide to leave NHS dentistry altogether and move into full-time private practice, you’ll no longer be able to contribute to the NHS Pension Scheme. As you won’t be building up further NHS pension benefits, it’s often sensible to put alternative arrangements in place to ensure you continue saving for your retirement.

Some common options include:

• Personal pension

A personal pension offers a straightforward and tax-efficient way to continue saving for your retirement. Your contributions will receive tax relief at your highest rate of income tax.

• Self-Invested Personal Pension (SIPP)

A SIPP allows you to choose from a wide range of investment options. This can be of particular benefit if you want more control over how your pension is invested.

• Contributing to your pension via a limited company

If you choose to incorporate your private practice, you can make employer contributions into a pension on your behalf. These are usually tax-deductible for the company, making it an efficient way to save.

A combination of these options can help provide security, flexibility and tax-efficiency, but what is right for you will depend on your individual circumstances. Seeking professional financial advice at this stage can help make sure your pension planning matches your career goals and long-term financial needs.

Tax considerations

When assessing your pension arrangement, remember that both your preserved NHS pension and any private pension you build will count towards tax limits set by HMRC. These limits are designed to cap the amount of tax relief you can claim in any one year.

• The Annual Allowance

The Annual Allowance is the maximum amount you can save into pensions each year without triggering a tax charge. For most people, this is set at £60,000 (2025/26 tax year), but it may be lower if you are a higher earner due to the tapered annual allowance (which can reduce your annual allowance to £10,000).

You can learn more about how the annual allowance impacts your NHS pension here.

• The Lump Sum Allowance (LSA)

When the Lifetime Allowance (LTA) was abolished in April 2024, the government introduced the Lump Sum Allowance (LSA) to replace it. The LSA limits the total amount of tax-free lump sums you can withdraw from your pension over your lifetime. Any withdrawals exceeding this limit will be taxed at your marginal income tax rate.

Why this matters

If you move into private practice and continue saving into a personal pension alongside your preserved NHS pension, the two pots combined may push you closer to these limits. Speaking to a Specialist Financial Adviser who understands both the NHS Pension Scheme and private practice can help you make the most of available allowances and avoid unnecessary charges.

Tax treatment depends on your individual circumstances and may be subject to change in the future.

Benefits you lose when you leave active membership

Perhaps one of the less obvious consequences of moving into full-time private practice is the loss of certain protections that come with being an active member of the NHS Pension Scheme.

While any benefits you’ve accrued will remain safe, you’ll no longer be covered by the additional security the scheme provides during your working life. For example:

• Death in service benefits

If you continue contributing, the NHSPS will pay a lump sum to your nominated beneficiary if you die before retirement. This is usually two years’ pensionable pay, and a significant form of life cover built into the scheme. Once you leave active membership, this lump sum payment is no longer available.

• Dependants’ pensions

Active membership also provides ongoing pensions to eligible dependants (such as a spouse, civil partner or dependent children) should you die while still in service. After you leave the scheme, the dependants’ pensions are still payable, but they are based only on your preserved pension benefits.

• Ill-health retirement

As an active member of the NHSPS, you may qualify for enhanced pension benefits if you are forced to retire early due to ill health. Once you stop contributing, this option is no longer available and you will only be entitled to draw your preserved benefits when you reach your retirement age.

These benefits can provide an important safety net for you and your loved ones. If you plan to leave the NHSPS, it’s worth considering how you might replace this protection – for example, by arranging life insurance or taking out an income protection policy.