Published: 24/7/2020
By Denplan & Chase de Vere

Opening the doors of dental practices into a new, strict normal is no mean feat for many dentists. From Monday 8 June 2020, they were expected to re-open, as long as they were able to follow infection control procedures and meet personal protection equipment (PPE) needs. Having taken a hit on their income since the COVID-19 lockdown, dentists now face a new range of expectations and decisions on reopening, which may make or break their client base that for many Dentists, has taken decades to nurture.

Our partners Chase de Vere Dental are expert financial advisors for the dental industry. We’ve asked them to help us put some minds at ease on a decision that’s bugging many Dentists right now: am I better off retiring than carrying on working with all the new strict requirements? 

Making the right pension choice is crucial

Faced with new ways of working and potentially difficult financial consequences, will some dentists choose to stop practising? If they do, many will also need to think about their pension planning. Because early retirement for many may mean accessing your NHS Pension.

Our partner Chase de Vere Dental says, “The bottom line is that until the COVID-19 pandemic is over, dentists will need to work according to strict social distancing and hygiene rules. This will make it much more challenging to fulfil NHS contract commitments - it will simply no longer be possible to see one patient every 15 minutes, as before.

“With NHS commitments taking much longer to fulfil, the time available for private work will inevitably be shorter. As a result, many dentists’ earnings may be negatively impacted for some time to come. In which case, it’s likely that some dentists will decide this is the moment to stop working – to sell their practice or to retire earlier than they had previously planned. But what will this mean for their NHS Pension Scheme benefits? How do they access their savings – and should they do so?

Get scheming

Chase de Vere Dental continues: “In practice, there are lots of different factors to take into account here. For example, many dentists will have built up benefits in more than one section of the NHS Pension Scheme – the 1995 or 2008 sections, say, or the 2015 scheme. They’ll need to consider whether to access all of these benefits simultaneously or whether to treat each section individually.

Look out for penalties

“Another issue is the potential cost of accessing pension benefits early. Different sections of the scheme carry different penalties for early access – and charge them in different circumstances – so this could have a big impact. Also, many dentists will have private pension entitlements in addition to the benefits they’re due from the NHS Pension Scheme. At first glance, taking an income from these plans, rather than accessing the NHS scheme to avoid penalties from the latter, may seem to make sense. But, this in itself can lead to additional taxation penalties for some Dentists when drawing their NHS Pension, which could mean that this course of action is not the most suitable for all.

There are scheme variations

Many of these questions are not straightforward and dentists should certainly consider taking financial advice on how to make the right decisions. Bear in mind that even the normal retirement age – the age at which members can access benefits without penalty - in the different NHS schemes varies:

• In the 1995 section, the normal pension age is 60, but savers are entitled to access their benefits from age 50 onwards if they were members of the section on 5.4.06 or 55 if they joined after this date
• In the 2008 section, the normal pension age is 65, with benefits accessible from age 55 onwards
• In the 2015 section, the normal pension age mirrors the state pension age. This is currently around 66 but is increasing gradually over time. Members can begin accessing benefits from age 55.

An example of what the rules mean

Chase de Vere Dental gives an example: “To see the potential impact of the different decisions that dentists might now make about their pension entitlements, imagine the case of a 55-year-old dentist, James. 

James’ pension situation

“Let’s say James has built up benefits in the 1995 section of the NHS Pension Scheme which amount to a £30,000 pension, plus a lump sum entitlement of £90,000. On top of this, he has 2015 scheme benefits of £8,000 and a private pension plan currently valued at £250,000. His state pension age is 67.

Beware the drop in value with early access

“Applying the rules of the different sections, James would see serious reductions to the value of his NHS Pension Scheme benefits if he chose to access them all today. The 1995 benefits would reduce to a pension of £23,610, with the lump sum dropping to £76,680; the 2015 benefit would come down to £4,432.

“However, benefits from the 1995 and 2015 schemes do not have to be taken simultaneously and a dentist in this position would have a number of different options.

James’ options

“For example, he could choose to leave his NHS entitlements untouched for longer, thus reducing or eliminating early access charges. Instead, he could take an income from his private pension. James would need to bear in mind that should he choose to return to work this would restrict further contributions to any private pensions.

Alternatively, he could draw down on the 1995 scheme benefits only, given that this section has a lower normal pension age, and delay drawing his 2015 benefits. Again, this would reduce early access charges and he’d be able to supplement his income using his private pension.

“Equally, James our Dentist might choose to take all his NHS pension benefits now, despite the prospect of reduced benefits. After all, he will likely be drawing the pension for longer than anticipated – five years more for the 1995 section and 12 years more on the 2015 scheme – so will have a good chance to recoup this money.

“Or our dentist might even have other sources of income – other savings and investments, say, or even different employment. In which case, he might choose to leave all his pension benefits untouched.

“Inevitably, these will be individual judgements for every dentist now considering their options. When you access your pension benefits – and in what order – will potentially make a very significant difference to your standard of living, but the optimal solution will depend on your personal circumstances.”

Your options around early retirement

It can be a difficult decision so think carefully. You don’t have to make the decision alone – there’s plenty of help and advice for you from our Denplan professionals and our partners, Chase de Vere Dental.

It’s worth considering what you enjoy about being a dentist – and how you will replace that if you decide to take early retirement. Take a look at our Denplan coronavirus support for dentists for more information and advice. Also in the meantime, stay well through the rest of lockdown. 

About Chase de Vere

Andrea Sproates has worked in Financial Services for 36 years. 21 years ago Andrea moved to BMA Services providing independent financial advice to both doctors and dentists before progressing to a Management position. She then spent several months managing a team at a specialist healthcare accountancy practice before returning as Head of BMA Services at Chase de Vere twelve years ago. Andrea now heads up both Chase de Vere Medical and Chase de Vere Dental and is widely recognised in the financial services arena as an expert on the NHS pension scheme and pension taxation legislation. 

Phil Bower has worked in management roles within Financial Services for over 25 years and has been a specialist in providing Financial Advice to Doctors and Dentists since 2004. Phil is a level 4 qualified Financial Adviser and has a passion for providing a high level of service, technical knowledge and financial advice to the Dental and Medical Profession. This passion led him to join Chase de Vere in early 2016 to work in partnership with the BMA as their Business Development Manager.