Dental Tribune United Kingdom Edition

year, it may well be an issue! What about Fixed Protec- tion? Well, if this dentist had ap- plied for this, then their increase in NHS scheme benefits would break what is known as the ‘rel- evant percentage’ rule, meaning that they would lose FP. Case Study 2 A 57 year old Maxillofacial den- tist with 33 years service, earning £148,000 pa NHS pensionable in- come: At the beginning of the year, the accrued benefits are: Pension - £61,050 Tax-free lump sum - £183,150 Using the same calculations and inflation figures, we get an Opening Value of £1,195,908 and a Closing Value of £1,248,880. Subtracting the opening value from the closing value gives a figure of £52,972 made within the PIP. So this dentist certainly does exceed the £50,000 AA figure. Also, it leaves no scope at all for contributions into a Personal Pension, unless the carry forward rule is used. Further, if no carry forward is possible, there will be a tax charge of the excess, mean- ing an unwelcome tax bill of £1,486 if a 50 per cent tax payer. This problem results because of the ‘double whammy’ of a much lower AA, and the factor increasing from 10 to 16. What about the LTA in this example? The calculation comes to £1,511,802, just over the £1.5m limit, and you can also mitigate this somewhat by foregoing an element of pension to boost the lump sum (commutation). In this case taking the maximum tax- free cash option from the NHS pension, it would result in a value of £1,408,523. In addition, let’s presume this dentist also has a personal pen- sion fund worth £200,000. So now there is most definitely a problem with the LTA, taking the total to £1,608,523. Therefore, technically, it would seem worthwhile for this dentist to apply for the FP £1.8m limit. However, yet again the ‘rel- evant percentage’ rule is broken meaning that FP would be lost. The member will need to make the decision whether to opt out or remain in the scheme. For such an important decision, we would recommend taking profes- sional advice. In summary Increasing contributions to any pension is becoming ever more problematic, and we therefore recommend that you review your situation in detail. But is not adding to your pension benefits a problem? Sometimes we find that there is no need for NHS dentists to buy more pension benefits in addition to their current planning (and on other occasions more contribu- tions need to be made into pen- sions). When asked why they are investing more into pensions, a new client will often say that it was for tax reasons, or that they thought they would need more pension as they would not have the full 40 years’ NHS service at age 60. Whilst understanding these reasons, often the decision to buy more pension has been made in isolation of their overall financial picture. Our suggestion is to have your financial plan cre- ated in advance to any major fi- nancial purchasing or investing decisions – diagnosis before pre- scription! The above information is based on our best understanding of recently announced legislation and no action should be taken by any NHS Pension Scheme member based purely on this information. DT page 19DTß About the author Ray Prince is a fee - based Certified Financial Planner with Rutherford Wilkinson Ltd and helps dentists plan towards their ideal retirement, as well as getting the best deals on protec- tion and investments. You can contact him on 0191 217 3340 and ray.prince@ rwpfg.co.uk . Also, to request a free copy of the popular email newsletter ‘Financial Tips’ visit www.medicalde- ntalfs.com Rutherford Wilkinson Ltd is authorised and regulated by the Fi- nancial Services Authority. Request Your Special Report - If you would like to receive a free copy of the ‘New Pensions Rules’ Special Report, please call the 24 Hour Pre-Recorded Line on 0845 653 1020 (quoting DT12) and we’ll post one to you. February 6-12, 201220 United Kingdom EditionMoney Matters Baldershøj 38 · DK-2635 Ishøj · Denmark Telephone:+45 4332 0990 Fax:+45 4332 0980 Email: mail@heka-dental.dk www.heka-dental.com UNIC - combines aesthetic beauty with ergonomic efficiency Easy to use technology creates a simple working procedure. UnicLine - Flexibility and individual design Design your own package. Choose from more than 200 options. DB Dental Equipment Limited · 53 Smithy Carr Lane · Brighouse West Yorkshire · HD6 4BG Telephone: 01484 401015 · Fax: 01484 401018 Email: sales@dbdental.co.uk www.dbdental.co.uk EQUIPMENT FROM HEKA DENTAL Free Herluf Skovsgaard Seminar Dentistry Show March 2nd & 3rd Contact DB Dental for details