Preparing for the retirement you deserve

Funding your retirement through pensions

As a dentist, it’s likely that there are a number of pension options available to you, each of which offer varying benefits.

When you work for the NHS, you become a member of the NHS Pension Scheme automatically.[i] For many, their NHS Pension becomes the main source of their income after retirement, and it offers a range of advantages. Once you have retired, you will receive a guaranteed pension payable for life. You will also have the option to receive a one-off lump sum in exchange for some of your annual pension, and you are able to plan when you start taking payments. There is also the possibility that you could receive your pension before your normal pension age, or have access to an early ill health retirement pension. Additionally, your family may be entitled to benefits such as a lump sum or pension should you pass away. To meet the costs of these benefits, your employer also contributes the equivalent of 20.6% of your pay.[ii] Members of the NHS Pension Scheme will also receive tax relief of their contributions up to a certain amount.[iii]

You may have an additional private pension, so it is important to understand what this means for you. Some people find it reassuring to know that they have an additional source of income post-retirement, and you should understand the benefits that a private pension might present. Putting money into a pension scheme can qualify you for tax relief. This means that some of the money that would have been taken as tax, can be added to your pension pot.[iv] Additionally, you may be able to take up to 25% of your pension as a tax-free lump sum when you retire.[v] It is important to be aware that the size of your pension will depend on how long you have saved for, any charges taken by your pension provider, and how well your investments have performed.[vi]

When planning for retirement, it is important to also understand the worth of your state pension. However, it is recommended not to rely on this as your sole income, even if you are eligible for the full state pension (£203.85 per week), as many people hope to retire on a higher amount for quality of life.[vii]

You should also take into consideration your options for pension annuity. This allows you to swap your pension fund for an income, lasting for as long as you live. Different providers will offer different annuity rates, so it is important to ensure you are receiving the best deals.[viii]

Investing to grow your wealth

You may also decide to make investments in preparation for your retirement. Some choose to begin exploring opportunities on the stock market, capitalising on their existing funds, choosing the level of risk depending on their individual circumstances. However, there are other ways to invest once you retire, like investing your pension.

Depending on your pension type and provider, you may find that you can invest your pension, giving it the potential to grow, rather than remain static. Different providers may be able to offer different options for how you’d like to invest your remaining pension once you move into drawdown, or begin taking lump sums. These possibilities might include offering ready-made investment options, or choosing your own investments that match your attitude to risk. You may also take the advice of a financial adviser, to help you select the best way to invest for your individual situation.[ix]

Even though these are important aspects to consider, each individual is different, so it is important to discuss your own experience and hopes for retirement with a financial adviser who understands your specific needs as a dentist. This will help you to get the most out of your pension, and ensure that you are making the right investment decisions to set you up for the retirement you desire. The team at money4dentists understands the unique needs of dental professionals, and is able to provide you with the best advice, specific to your financial situation, to meet your goals for retirement.

Preparing for retirement may seem daunting, but by understanding the options available to you to help you enjoy a comfortable retirement, with the help of expert advisers, you can feel confident that your pensions and investments are working their hardest for you.