Financial planning in the build up to retirement & beyond
In Part 3 of our planning for retirement series, Senior Financial Planning Consultant, Rob Houghton, discusses how NHS staff can effectively plan for retirement.
Some years back, I remember reading an interesting set of statistics published by a UK leading insurer. The one statement in that article that has always stuck in my mind was in summary, the majority of individuals in the survey spent more time planning their next annual holiday than they did planning their retirement.
Why is that I wondered? Well, I think through having worked with healthcare professionals for many years now, some of the possible reasons for healthcare professionals in that quantum could have been because:
- They’re time short during their working years
- The NHS pension scheme itself is complex, having multiple sections to it, each calculated differently
- Other personal/occupational pensions have also evolved over the years
- The UK tax regime concerning pensions has changed numerous times over the years
- Individuals can become complacent when planning their retirement
What is the reasoning behind individuals’ lack of planning for retirement?
Pensions are often generically viewed as an asset in which an employer takes the money from an individual, and receives said contributions and it will hopefully be sufficient when the time comes to access it.
As a professional adviser in this area, I would argue perhaps to the contrary.
Pensions are a multitude of complex, financial services regulated assets which have much wider potential uses than most people realise in enhancing the wealth of its owner and possibly, their family!
Assuming you’ve watched the two previous videos, you will have realised I am a big fan of keeping accurate financial records, as it means the formulation and actioning of a financial plan is all that easier to develop, implement & review.
Given retirement is a one-shot chance to make optimal decisions, it deserves your time and investment in planning ahead as opposed to a last-minute plan, or worse still, none at all.
What are the basic steps to launch into retirement?
Ensure your NHS pension record is up to date
Confirm your NHS pension record is up to date by enrolling for the Total Reward Statement and checking there are no gaps in your employment history or pensionable earnings history.
Top tip – contrast this with a copy of your CV for easy-to-spot errors or omissions.
Check your pension protections
Double check you aren’t going to lose irreplaceable pension protection and/or consider how previous election for lifetime allowance protections may still add value moving forwards.
Top-up your state pension if needed
Consider what top-ups could be made to your state pension if you have gaps. Remember this is an inflation linked income for life!
Analyse your spending habits
Review your spending habits to consider how they may change in the future and give thought as to how your collective net pensions can support your in-retirement spending levels.
Make use of NHS pension flexibilities
Consider how you can make use of the NHS pension flexibilities to your advantage.
More frequently, my healthcare clients are looking to new flexibilities to better understand how they could retire. This has caused some to opt to remain working for longer than previously considered, albeit on different terms.
This is an effort to continue giving to the healthcare system but on the proviso, it suits them from both financial and well-being perspectives.
Guide to retirement planning for the healthcare sector
Our planning for retirement hub includes a variety of helpful insight pieces for every stage of healthcare professionals, whether you are early in your career, or looking to advance your plans to retire within the next few years.
Spring Budget 2023 and its impact on care sector pensions
15th March 2023, enter Jeremy Hunt. Now, on that day, some in the care sector would say Jeremy went from zero to hero with his increases of pension tax thresholds and removal of.
In addition to the Chancellors’ amendments to the UK pension tax regime, the NHS has also recently offered members a far more flexible pensions scheme. Both combined as an effort to entice you to not give up entirely on the NHS.
This is great news, or is it? The problem is whenever a broader set of options are presented, we can become like kids in a candy shop. The result is greater complexity and a subsequent lack of decisive action due to a lack of understanding.
Should I opt back into the NHS pension scheme?
The key questions I hear now are, how best to retire while maximising pension benefits? And should opting back into the NHS pension be a consideration?
Its true, the NHS pension remains a phenomenal scheme to be a member of, and the underlying thoughts members are having are primarily now about ensuring they have the resource to enjoy the quality of lifestyle they desire in retirement and somewhat less about tax (unless we have a change of government).
In addition to this, one’s mindset will also progressively shift towards the mitigation of other issues, such as inheritance tax or how best to provide for potential long-term care costs.