Iain Stevenson, Head of Dental at Wesleyan Financial Services, shares key financial planning areas for dentists to address for the year ahead…
Financial planning and goal setting is an important area to focus on for the year ahead - a fresh start that will enable you to take charge of what’s in your control. Particularly after a year like 2022 which was fraught with economic challenges.
There is much at risk and it’s tricky to keep up to date with all the economic and political developments - the resulting impact on finances is hard to predict. Against that backdrop, you might miss out on making some positive decisions that will help you achieve key milestones on life’s journey and bolster your financial security.
Here are a few points to consider as you reflect on your finances. Decisions, relevance and potential solutions will depend on your personal circumstances, but the idea is to begin probing your current financial plan to see if it’s still moving you toward your goals.
Start your pension
Saving for retirement for those where retirement is in the distant future is an area that’s often shelved for another day, when life and work in practice are less hectic. However, the earlier you start, the less you will likely need to contribute in order to reach your goal.
If you are in the NHS pension scheme, this is because the longer your pension is open, the greater the potential is for pension growth due to it being index-linked to inflation – meaning your pension pot will increase in line with the cost of living. Similarly for those with a personal pension, this also has the potential to grow on top of your contributions due to compound interest.
Saving for retirement is also incredibly tax efficient as every contribution you make could benefit from at least 20 percent tax relief (subject to annual allowance).
Ask a specialist financial adviser to go over the figures and talk you through a projection of your retirement provisions. Consider the ‘cost of delay’ and think about how each month you decide not to save gives you less time to build the level of retirement you need and therefore will cost you more as time goes on to hit the same goal.
Tax efficient saving
Further to tax-efficient pension allowances, engage with your accountant and financial adviser to consider if it might be beneficial to ensure you take advantage of any tax-efficient plans well ahead of the end of the tax year in April. Considerations include ISA allowances, Capital Gains Tax, Dividends Allowances, and financial gifts to name a few – particularly as some of these are on a ‘use it or lose it’ basis each year.
But of course, these options have to be right for your personal circumstances – it’s worth taking expert advice to ensure you are making the right decisions.
Financial protection for future security
While it might be tempting in the current climate to reduce the level of your life cover or income protection to offset increasing costs elsewhere, it’s worth considering how you will be financially impacted should that rainy day come.
Will the reduction in cover still allow you to maintain your current lifestyle? An ill-informed or hasty decision in this area could create serious financial hardship at a later date if you cancel or reduce cover.
Furthermore, if you’re a business owner, use this year to ask your specialist financial adviser what happens to your business asset should you die – not the nicest thing to think about, but with far-reaching consequences for your family and business partners if left unaddressed. You need to ensure you fully understand this and protect what is likely to be your greatest personal asset.
Get retirement ready
If you’re planning to retire this year or even within the next five years, you need to start planning your exit strategy now.
The more time you give yourself, the better informed you will be and the more options you have. The best form of retirement is where you are in complete control - you are doing it on your terms, for all the right reasons with the right level of income. After a lifetime of study, hard work in practice and years of saving, retirement should be a time when you enjoy the fruits of your labour.
Leaving everything until a few months before can lead to rushed, ill-informed and potentially irreversible decisions. For a principal dentist, the timeframes are even longer due to the complexity of practice sales. A strong exit strategy from the profession should help you avoid having to make sacrifices and compromises.
Save surplus funds wisely
Often financial advisers are asked whether it’s best to invest or use traditional savings accounts, which depends on personal circumstances.
When considering where is best to put your hard-earned money, it should be based on your end goal, your timeframes, your attitude to risk, affordability and your own personal views, tax position and objectives. What is right for one person may not be right for you, so take time to discuss this with an expert.
The best saving plans and general financial planning should be viewed with reference to the short, medium and long term. Take your time to consider any expected expenditure within the next 5 years and ensure you have access to the funds required.
Then perhaps jump to the longer term where you might want to consider if your retirement plans remain on track and what life looks like in 10-, 15- or 20-years’ time.
The medium term can be the most difficult to plan for. There will be times within the next 5 to 10 years where you might need access to cash, but you may not know when, how much or how many life events might happen.
Due to this, people tend to postpone medium term decisions which may prove to be costly as you may miss out on some excellent opportunities to save and invest. The key is to ensure your plans provide the level of flexibility in terms of contributions and access which suits you.
Savings might offer more security for your money when bearing in mind that the value of investments can go up and down meaning you could get back less than you invest, but investments over the long term (minimum of five years) could yield greater results.
Finally, it’s crucial to review your savings and investment portfolio regularly to ensure its performing well and is still in line with your evolving priorities and goals.
Seeks advice from specialists
Make this year the year to take charge of your finances, set strong goals and put plans in place to meet them.
You can book a no-obligation financial review with a Specialist Dental Financial Adviser at Wesleyan Financial Services by visiting www.wesleyan.co.uk/dental or calling 0800 316 3784.
Please note: Tax treatment depends on individual circumstances and may be subject to change in future.
About Iain Stevenson
Iain is Head of Dental at Wesleyan Financial Services, leading a team of Specialist Dental Financial Advisers across the UK. The team works exclusively with dentists, their businesses and their families to secure financial futures.
Advice is provided by Wesleyan Financial Services Ltd.
‘WESLEYAN’ is a trading name of the Wesleyan Group of companies.
Wesleyan Financial Services Ltd (Registered in England and Wales No. 1651212) is authorised and regulated by the Financial Conduct Authority and is wholly owned by Wesleyan Assurance Society. Wesleyan Assurance Society is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Incorporated in England and Wales by Private Act of Parliament (No. ZC145). Registered Office: Colmore Circus, Birmingham B4 6AR. Telephone: 0345 351 2352. Fax: 0121 200 2971. Calls may be recorded to help us provide, monitor and improve our services to you.