1. Medical Money Management
Established in 1971 to provide specialist insurance and financial planning advice to the medical and dental professions.
Now one of the UK’s leading independent financial advisers; chosen by those who demand and appreciate independent financial advice provided in a personal and bespoke manner from well qualified professionals
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2. Chris Hopkinson & Kelvin Turner Medical Money Management
Bradford Exit Course
Weetwood Hall
February 2009
Chris Hopkinson & Kelvin Turner
Medical Money Management
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3. Agenda Buying into a Practice Summary of NHS Pensions Scheme Benefits
Pensions Simplification Legislation
The “New” NHS Pension Scheme
Basic Financial Planning for GPs
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4. Medical Money Management
Why was the Cost/Notional Rent
Scheme Introduced?
Now known as Borrowing Costs Reimbursement!!
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5. Medical Money Management
Why was the Cost/Notional Rent
Scheme Introduced?
Answer: Because it saves the
Government a lot of money!
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6. COST RENT now known as Borrowing Costs Reimbursement is: Approved Costs x Prescribed Percentage
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7. COST RENT IS: The rental paid by the PCT to the Practice for the use of the DOCTORS’ SURGERY, thereby allowing the PCT’s Patients to be treated.
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8. NOTIONAL RENT IS: The current Market Rent assessed by the District Valuer based on the Alternative use “VALUE OF THE DOCTORS’ SURGERY.
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9. NOTIONAL RENT IS: The rental paid by the PCT to the Practice for the use of the DOCTORS’ SURGERY, thereby allowing the PCT’s Patients to be treated.
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10. COST/NOTIONAL RENT Continues for as long as the building
is used to treat the PCT’s Patients.
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11. COST/NOTIONAL RENT
Providing the Cost/Notional Rent is mostly sufficient to cover the interest on a loan, there is little financial consequence should a doctor
Die
Leave
Retire
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12. COST/NOTIONAL RENT
The fact that most Doctors have to borrow money to build or buy into a Surgery is largely irrelevant to the payment of the Cost or Notional Rent.
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13. COST/NOTIONAL RENT Questions to ask?
When will I be expected to buy a share of the surgery premises?
How will the share be valued?
Is the Practice in receipt of Cost or Notional Rent?
Whichever – how much and when was the last triennial review?
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14. Additional details required
COST/NOTIONAL RENT
Additional details required
Existing Loan Details:
Amount
Term
Rate (Fixed or Variable)
Repayment Method
Security
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15. Summary of NHS Pension Scheme Benefits
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16. The problems with pensions
Living longer
In 1908 the State Pension was introduced and made available to men only, over the age of 70
In 1908 the life expectancy for a male was 48
Ageing population
July 2007 was the first time there were more people retired than the number of children at school
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17. Contributions You pay 5% - 8.5% Practice pays 14% Total 19% - 22.5%
Remainder: Subsidised by DOH (Treasury)
Not “funded”, pay-as-you-go
Income tax relief
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18. Individual Contributions
You pay 5% - 8.5%
Annual Pensionable Pay
Contribution Rate
Up to £19,165 5%
£19,166 - £63,416
6.5%
£63,417 - £99,999
7.5%
£100,000 +
8.5%
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19. What do you get for your money ?
Lump Sum and Index Linked Pension when you retire
An Index Linked Ill Health Retirement Pension
Death in Service Benefits
Index Linked Widow’s / Civil partner’s / Dependants’ Pensions
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20. NHSPS Contribution/Benefit Records
Scotland: Scottish Public Pensions Agency
7 Tweedside Park, Tweedside Bank, Galashiels, TD1 3TE
Tel:
England/Wales: NHS Pensions Agency,
Hesketh House,
Broadway, Fleetwood, Lancs, FY7 8LG
Tel:
Northern Ireland: HPSS (Superannuation), Waterside House,
75 Duke Street, Londonderry, BT47 1F Tel:
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21. Maximum Benefits
Maximum Service 40 years at 60 rising to 45 years at 65
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22. General Medical Practitioner (Salaried GP)
Calculating Benefits
Officers
General Medical Practitioner (Salaried GP)
Pension = 1/80 × Final Salary for each year of service
Lump sum = 3 x Pension
1.4% x Total Dynamised Income
Lump sum = 3 x Pension
Additional lump sum available subject to computation
Subject to pre-72 provisions
Explain effect of 80ths.
Explain dynamised career earnings
Now a couple of ‘exercises’...
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23. Worked example: Officer
Officer joins NHSPS at age 24
Assume retirement at age 60
Assume final salary of £100,000 pa
Total service is 36 years
Pension = 36/80 x £100,000 = £45,000 pa
Lump sum = 3 x £45,000 = £135,000
Delegate to calculate pension from average dynamised earnings.
Ignore pre-72 service rules
Explain effect pf pre-GP officer service < 10 years.
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24. Worked example: Practitioner
Practitioner joins NHSPS at age 24
I year Break in Service
Assume retirement at age 60
Assume dynamised career average earnings of £100,000 pa
Total (revalued) career earnings = £3.5m (35 years x £ 100,000)
Pension = 1.4% x £3.5m = £49,000 pa
Lump sum = 3 x £49,000 = £147,000
Delegate to calculate pension from average dynamised earnings.
Ignore pre-72 service rules
Explain effect pf pre-GP officer service < 10 years.
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25. Voluntary Early Retirement
Available from age 50 until 5th April 2010
Available from 55 thereafter
Age 55 56 57 58 59 60
Pension
75%
80%
84%
89%
94%
100%
Lump sum
86%
92%
97%
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26. Ill Health Retirement Tier One
Where a member is assessed as being “permanently incapable of efficiently discharging the duties of their present job in the NHS”.
Benefits will not be increased.
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27. Ill Health Retirement – Example Tier One
30 year old GP takes Ill Health Retirement
Service of 5 years
AVERAGE income in General Practice £50,000
Pension would be around £3,125 pa
Lump sum £9,375
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28. Ill Health Retirement Tier Two MMM
Payable when a member is “permanently incapable of doing both their current job and other regular employment across the general field of employment of like duration”
“Their previous training, qualifications and experience, and not just the medical conditions will be taken into account in assessment of their permanent incapacity”
Entitlement to early payment of the retirement benefits earned to date could be paid.
Increase in pension by 2/3rds of the member’s prospective membership to NRD (60 or 65).
A minimum increase of 4 years capped at 60 until March 2016 (but not for the new scheme).
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29. Ill Health Retirement – Example Tier Two
30 year old GP takes Ill Health Retirement
Service of 5 years
Average income in General Practice £50,000
Service is up-rated by 2/3 potential membership pension service
Pension would be around £15,625 pa
Lump sum of around £46,875
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30. Terminal Illness
A member, who is terminally ill and does not expect to live longer than 1 year, can apply to exchange all of their pension for a one-off, usually tax-free, payment.
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31. Death in Service Benefits
3 elements - what are they?
Lump sum gratuity
Spouse’s / Civil partner’s pension
Dependants’ allowance
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32. Lump Sum Death in pensionable employment before 70
2 x pensionable earnings
Paid to surviving widow or widower or Civil partner (unless notice in writing to not do so)
If no spouse or Civil partner (or as above), paid to personal representatives
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33. Spouse’s / Civil Partner’s Pension
3 months’ member’s final pay (6 months if 1+ child)
Then pension of 50% of member’s pension based on ill health
In retirement, widow’s / Civil partner’s pension is 50% of non-actuarially reduced pension
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34. Dependants’ Allowance
Child under 23 or in full time education
25% of member’s pension (50% if 2+)
33% and 67% for orphans
As for widows / Civil partners, dependant’s allowances are based on non-actuarially reduced pensions
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35. Pension Simplification
Introduce a Standard Life Time Allowance (SLA) of currently £1.65 million (indexed) on the size of the pension fund
Any pension benefits in excess of the SLA will be subject to the Lifetime Allowance Charge
The SLA Charge is a tax of 55% on excess funds
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36. NHS Benefits & SLA
Anticipate accumulated NHS benefits will be 20 x pension + Lump sum
A pension of say £75,000 pa would be valued in excess of £1.7 million and breach the SLA.
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37. Pensions Simplification
All Schemes will be treated the same
AVC will have tax free cash option
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38. Pensions Simplification
Higher contributions allowed
100% of Earned Income
Annual Allowance
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39. Changes to the existing NHSPS 1/4/08
Added Years replaced 1/4/08
3x Lump Sum increased to 25% of “fund”
Survivor’s Pension paid to “qualifying” partners
Retirement age for NHS members remaining at 60
Children's Pension increased to age 23
Ill health benefits changed
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40. New joiners on or after 1/4/08 “New NHSPS”
New scheme with different rules & regulations
Normal Pension Age 65
Increased accrual rate (1/60th) – with no automatic lump sum
Final pensionable pay – average of best 3 consecutive years in the last 10
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41. New joiners on or after 1/4/08
Early retirement from age 55
Actuarial increase on late retirement
Pensionable re-employment allowed
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42. Personal Financial Planning
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43. Personal Financial Planning Objectives
To ensure you have enough income to maintain and improve your standard of living in real terms throughout your life.
To ensure that following the death of a partner, the surviving spouse / Civil partner has enough income and capital to maintain his / her standard of living in real terms for his / her life.
To create a transfer mechanism to pass assets to your beneficiaries.
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44. Why wills? Ensure your assets are passed to the right person(s)
Appoint guardian for your children
To mitigate any Inheritance Tax
To avoid the laws of intestacy
To avoid unnecessary delays
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45. Protection Issues Life Assurance
Term Assurance - Level, Convertible and Decreasing
Family Income Benefit
Whole Life - With Profit and Unit Linked
Endowment - Low Cost, With Profit and Unit linked
Writing Policies under Trust
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46. Writing policies under Trust
Protection Issues
Writing policies under Trust
Speeds up the payment of any claim
Ensures only those people you want to benefit actually benefit
Paid outside of the estate
Reduces IHT liability
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47. Critical Illness Insurance
Protection Issues
Critical Illness Insurance
Provides a capital sum in the event of being diagnosed with a “qualifying” illness (Usually to protect a mortgage or other debts)
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48. Income Protection Policy
Protection Issues
Income Protection Policy
Provides a regular income after a waiting period (deferred period) to a pre-determined age (normally age 60 or 65) or until return to work
Benefits are tax free
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49. Income Protection Policy
Protection Issues
Income Protection Policy
Points to Consider:
Definition of Illness
Definition of Occupation
Practice Agreement
Level of Cover
NHS Ill-health Retirement Benefits
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50. Protection Issues – Income Protection Policy
Cover should dovetail with Practice Agreement
Do not over insure
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51. Protection Issues Locum Cover
Provides a regular income after a waiting period for a specific period of time (usually up to 12 months after incapacity)
Premiums qualify for tax relief – benefits are taxed
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52. Protection Issues – Locum Cover
What the PCT Provides?
Pensionable Income for up to 12 months providing medical services continue to be provided for patients
Possible PCT Locum Allowance for up to 12 months subject to residual list size (and other factors)
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53. Protection Issues – Locum Insurance
Locum costs vary
PCT support varies
Current Locum costs are £2,500+ per week
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54. Where to get advice? Tax Advice – get a specialist Accountant
Making a will – use a multi partner practice
Financial Planning – use a specialist Independent Financial Adviser
Delegate to calculate pension from average dynamised earnings.
Ignore pre-72 service rules
Explain effect pf pre-GP officer service < 10 years.
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55. M M M Medical Money Management SUMMARY Stay in the NHS Pension Scheme
Obtain statement of service and current benefits
Arrange a review – preferably with MMM!
Complete MMM and NHS Enquiry Forms
Medical Money Management
Authorised by the Financial Services Authority

56. Medical Money Management
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Please note:
The content of this presentation is intended for general guidance only and you should seek specific financial advice before taking action on any aspect of it.
The risk profile of investment products varies and should be matched to your individual attitude to risk.
The value of certain investment products can go down as well as up.
Some funds may include investments that are not designated in sterling and the prices may alter purely as a result of exchange rate movements.
Past performance is not necessarily a guide to future performance.
Medical Money Management
Authorised and Regulated by the Financial Services Authority