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The government is looking to make pensions more flexible for senior doctors and will consult on this matter.

In recent months, fears over staff attrition in the NHS have increased due to the tax implications of breaching the lifetime or annual allowance.

Under the proposals now put forward, known as a 50:50 plan, the government argues high-earning clinicians would be able to take better advantage of pension provision and working patterns by building their NHS pension more gradually, with steadier contributions to avoiding significant tax charges on a regular basis. By halving pension contributions in exchange for half the rate of pension growth, the government argues that doctors would be able to take on additional shifts or fill rota gaps with less concerns over the tax implications.

Health and social care secretary Matt Hancock said: ‘Each and every senior consultant, nurse or GP is crucial to the future of our NHS, yet we are losing too many of our most experienced people early because of frustrations over pensions.

“We have listened to the concerns of hardworking staff across the country and are determined to find a solution that better supports our senior clinicians so we can continue to attract and keep the best people.”

The government said the new pension flexibility would be available to ‘senior clinicians who can demonstrate they expect to face an annual allowance charge’, which would mean doctors who have built up more than £40,000 of benefit in their NHS pension in a year, or those who have an adjusted income of over £150,000.

If you are concerned about the impact of tax charges on your Public Sector pension, please get in touch to discuss with one of our consultants.

Establishing a regular savings plan using  surplus income can be an extremely effective route to building wealth and achieving your financial goals over the medium to longer term.

There are a number of benefits to “drip-feeding” even modest sums  into an investment portfolio each month via a direct debit, as outlined below.

First, regular contributions can help in achieving smoother returns and mitigate timing  risk.  Part and parcel of investing is the fact that investments go up and down in value.  Investing after prices have fallen means buying into your portfolio at a lower level and bringing down the average price you have paid since the start of the investment.  This is known as “pound-cost averaging” and through regular investing, the peaks and troughs will be ironed out or ‘smoothed’ over the longer term.

Second, market timing is extremely difficult and even investment professionals do not have a crystal ball and cannot predict, with any certainty, which direction markets will move in the short term.  Regular investing helps take the guess work out of when to invest, as investments will be made automatically on a given date each month.  Empirical evidence indicates that the average investor tends to follow the crowd – allowing the herding instinct to displace rational thinking – investing more when the markets rise and disinvesting when it falls; this can lead to inferior long term rewards.

Third, investing smaller sums on a regular basis could enable you to start investing sooner than if you were to wait for a lump sum to build up.  This gives you more time to take advantage of the growth potential of compounding investment returns.

Fourth, you  do not have to commit to a fixed amount each month; you can change the amount invested as required, to suit your circumstances.  Even investing a relatively modest sum each month can lead to a significant pot over the long term, as shown in the following table, which assumes net investment returns of 4% per annum.

Fifth, and finally,  you will not forget to invest, as the investments are made automatically and you will come to view the contributions as part of your regular monthly spending.  Indeed, after time, the regular debits will become of no consequence – and when that happens, it is possibly time to raise the ante!

When it comes to investing, we highly recommend that you seek financial advice and we are happy to discuss your requirements with you.

By Elliot Gothold, Consultant.

Last weekend our Managing Director, Adam Katten, appeared in the Saturday Times talking about pensions and the fact that it’s never too early to start financially planning your later years.

Coming not long after two successful lectures for final year students at the British College of Osteopathic Medicine, as a father of four children himself (aged 20-27 years) he understands the difficulty in conveying to a 22 year old the importance of putting aside money each month into a pension, especially when it can’t be touched until the ripe old age of 57.

When we also factor in living expenses, studying, potentially moving away from parents for the first time, pension planning for the younger generation is challenging although the figures clearly speak for themselves.

As Adam explained “The tax reliefs associated with pensions are generous, as they attract tax relief at source. Therefore £100 invested into your pension only costs £80 for a basic rate tax payer and £60 for those paying tax at the higher rate. The growth of your pension is tax free and when you reach retirement, 25% of the fund can be drawn tax-free.”

“The benefits of starting a pension aged 25 rather than 35 can be illustrated by comparing the projected pension fund at 65 based on an individual earning £50,000 per year with a growth rate of 4% above inflation. Starting at 25, this individual will achieve a pension fund of £741,000 at 65 years old whilst starting a pension at 35, would reach £437,000. Those extra 10 years made the pension fund almost 70% larger!”

As demographically we are living longer, it is more important than ever for younger people to recognise the importance of starting to save as early as possible and give themselves the opportunity to spend their money during retirement. We would even encourage parents or grandparents to start pensions for younger children as there are no minimum ages.

Last month our Managing Director Adam Katten gave his second lecture in financial education to final year students at the British College of Osteopathic Medicine.

The college are offering students the opportunity to gain a better understanding of financial planning before they leave and step into the world of work, either through joining a current osteopathic practice or setting up as self-employed consultants.

The first lecture that Adam gave late last year focused on financial and protection planning; March’s lecture concentrated on pensions and investment opportunities to help students make informed decisions on maximising tax efficiencies and starting to save for their futures as early as possible.

With financial education now part of the secondary school curriculum, children are starting to learn the basics of budgeting, savings and getting to grips with bank accounts, however it isn’t until they leave home for university, or to work, that the responsibility of paying rent and bills becomes a reality.  Combine this with potentially running your own business, thinking about pensions with or without auto-enrolment and tax implications, the fact that the College are providing financial education is a great way to increase students’ preparation and awareness.

One student commented “I felt Adam’s lecture was really interesting and gave useful information for financial planning. I would certainly trust him for information or advice in the future!”

With the average pension pot for people aged 45 years currently at only £60,000, it’s critical that young people start saving as early as possible and learning how to make their money work efficiently and NLP Financial Management are delighted to be involved in initiatives such as these.