Retirement planning focus

Taking your NHS pension early – opportunity or mistake?

15 Feb 2019
John Drysdale
A 5 minute read
by Jon Drysdale

What flexibility there is to take your NHS pension ‘early’ and how can you be better informed to make the right decision.

Increasingly, dentists are adopting a phased approach to retirement. This could mean selling the practice in advance of the usual NHS retirement age and continuing as an associate. The ability to continue clinical work without the stress of ownership appeals to many for obvious reasons.

So do you take your NHS pension early and suffer a penalty or leave it in situ until you arrive at the usual NHS retirement age of 60 or 65? The main disadvantage is simply that you give away some pension and lump sum.

On balance if you have ongoing associate income that meets your expenditure requirements it is probably worth leaving your NHS pension intact. You may wish to stop or continue contributions. We can guide you on this after considering your income tax position and factors such as how much ongoing NHS income you will have. There are other aggravating factors that also need specialist planning input:

Lifetime Allowance (LTA)

Drawing your NHS pension triggers a test against the LTA. Taking the NHS pension early or increasing your lump sum may help reduce your liability to the LTA. We can check if HMRC LTA protection is suitable for you. If you have a personal pension, you also need to consider the LTA. It is highly likely that your personal pension won’t offer the required flexibility to mitigate or defer an LTA charge.

Annual Allowance (AA)

If you overshoot your AA it might be time to opt out of the NHS pension. This doesn’t mean you have to take the pension early. We can run a cost benefit exercise to help you make the right decision.

Predicting retirement income

You should apply online for your Total Reward Statement. This provides vital information about your pension and tax-free lump sum but there are two points to make here. First, it won’t give you up to date figures – they will be at least 12 months out of date. Second, it doesn’t offer predictions, although we can use the document to do this for you.

You should apply online for your Total Reward Statement. This provides vital information about your pension and tax-free lump sum but there are two points to make here. First, it won’t give you up to date figures – they will be at least 12 months out of date. Second, it doesn’t offer predictions, although we can use the document to do this for you.

Beyond the NHS pension

If you have built up a portfolio over the years by making regular contributions to a personal pension and ISAs, now is the time to reassess investment risk. If you will require regular income from these plans it is important to understand the tax implications and realistic income expectations. Diversification is vital and navigating the options is something we help all our clients with.


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Case study

Maximising investments before selling and retirement

Reaching a financial crossroads is certainty for dentists selling their business. Making the right decisions, underpinned by professional guidance is the key to a financially secure retirement. PFM Dental have the skills and qualifications to deliver the right advice at the right time.  

— Jon Drysdale, director, PFM Dental