Wealth planning issues of various kinds have been a real feature of our conversations with High Net Worth Individuals in recent weeks.
Wealth management enquiries from medics (and dentists) have surged in recent months as they ponder new pension planning complexities. Here, we explain why these super-busy professionals are often in urgent need of advice.
High-earning, yet time-poor professionals have always made up a large proportion of findaWEALTHMANAGER’s users, but a recent flood of enquiries has meant that medics and dentists have been accounting for as much as a tenth of our traffic.
Chief among the reasons for senior healthcare professionals to now be seeking specialist financial planning advice are, of course, the pension changes that have come thick and fast in the past decade causing thorny complexities to negotiate.
Like all higher-earners, doctors and dentists have had to contend with dramatic reductions in the lifetime allowance, which stood at £1.8m in 2011 but has been tapered down to £1.055m
Like all higher-earners, doctors and dentists have had to contend with dramatic reductions in the lifetime allowance, which stood at £1.8m in 2011 but has been tapered down to £1.055m. Then, there was the 2016 introduction of tapered annual allowance limiting the amount that can be put into an NHS pension pot each year, which affects those with an adjusted income of over £150,000 (those earning more than £210,000 may have an annual allowance of only £10,000).
Additionally, there is the issue of taking lump sums from the NHS Pension Scheme. This is compulsory for members of the 1995 or 2008 section of the Scheme (but not for the one for 2015). The minimum amount is typically three times the pension secured, but – depending on the section of the scheme that applies – the maximum withdrawal could be as much as 5.36 times.
Senior healthcare professionals are starting to see that those exceeding their pension allowances may be hit with punitive tax bills they are ill-prepared to pay – a realisation which has led to many doctors either reluctantly reducing their working hours or even retiring earlier than they would have liked. Some are even opting to leave the NHS Pension Scheme to avoid tax charges, something that professionals are warning is often a terrible mistake.
The problem, advisers say, is that all too often senior healthcare workers are making knee-jerk decisions based too heavily on possible tax charges and neglecting the bigger financial planning picture. Many are not taking professional advice or are taking it from advisers ill-suited to the task.
The problem, advisers say, is that all too often senior healthcare workers are making knee-jerk decisions based too heavily on possible tax charges and neglecting the bigger financial planning picture
It is vital that healthcare professionals get guidance from experts who are highly experienced in that field because they need a thoroughgoing understanding how the tapered annual allowance is calculated for NHS pensions, for example.
More broadly, healthcare professionals need pension advice which aligns to a comprehensive financial plan. Those compulsory lump sums can be a wonderful thing, but knowing how much is the right amount to take only comes from answering a whole raft of other questions covering your overall wealth, tax position and lifestyle ambitions.
In many ways, senior healthcare professionals are “classic” wealth management clients – that is, people who asset-rich but time-poor and who might be very highly-educated yet lack the knowledge required to manage their wealth optimally. Investing on a DIY basis is a big commitment for even the most leisured people, and there will be few busy medics who can dedicate the time they would need to properly monitor and manage a portfolio. Then, as we have seen, there are myriad financial planning and tax complexities for them to contend with on top of their investments.
In our experience, most senior healthcare professionals are looking for a way to maximise their financial potential, but also their free time. If that sounds like you, then entering a discretionary investment management relationship, where you set the parameters for managing your portfolio and delegate day-to-day decisions, could be a great route to better returns and peace of mind.
You are well entitled to look forward to a fantastic retirement after a busy career in healthcare, but remember that a well-funded pension isn’t the same as a well-managed one. Also bear in mind that pension planning should be just one part of an over-arching financial plan.
You are the expert in your field, and there is a lot to gain by consulting an expert in the field of managing of wealth. A good wealth management relationship means you can get on with your vocation safe in the knowledge that you have maximised your rewards. Try our fast, free matching service to get connected with well-matched advisers for your needs. Alternatively, speak to our expert team to discover where a professional wealth manager could add real value for you.