I asked specialist medical Independent Financial Adviser Dan Atkinson five questions to give us a summary of the most relevant financial changes for doctors.
The government kept their promise to address the pensions issue, in particular the annual allowance. The annual allowance of £40,000 remains but the circumstances in which this will be reduced has changed for many. The all important threshold income figure has been increased to £200,000 – that’s a £90,000 increase! Only if your threshold income exceeds this level will you have to consider adjusted income.
However, if your adjusted income exceeds £240,000 per annum, then you will be subject to a reduced annual allowance and possible tax charge. Previously the lower limit was £10,000, it is reducing to £4,000.
As you are probably aware the NHS offers valuable protection benefits including life assurance, a pension if you are unable to return to work as well as dependents pension. The benefits differ between the various schemes. It is wise to check your current personal protection arrangements as they are the financial foundation of all planning and the NHS may not fulfil all your requirements. We are aware that some medics have left the NHS pension scheme, largely due to the annual and lifetime allowance limits. You may wish to consider your position as some of the protection element are lost or change if you are not contributing to the pension scheme. We understand they are reviewing the death in service benefits for locums.
Many families are suffering, for instance some dentists have seen their income stop altogether, households that are reliant on two income may have had one cease and private practice for many has slowed or halted. So aside from checking your protection contracts, it has highlighted the importance of an Emergency fund.
Having a robust emergency fund allows you to have a greater piece of mind. An emergency fund is money set aside that is easy to access and should ideally be a least three months income. It is not ideal to live from one payslip to another. Having a financial buffer gives you freedoms, it can allow breathing space to make important decisions as and when they occur, often buying you time. It is best to set the money aside so its not in your current account and doesn’t get mixed up with your day to day living.
If you haven’t made this provision you may be reading this and saying to yourself ‘It’s a bit late now!’ but as this current situation passes…and it will…make setting up an emergency fund a new goal in your post Corona financial landscape. I hope we never experience something on this global scale again but you will, without a doubt, experience your own difficult times and your future self will thank you for making this change.
The Government have given additional time for the self-assessment payments on accounts this year due to Corona. If you were due to make the additional payment on account by 31 July 2020 you do not need to pay this until 31 January 2021. But you still need to submit your actual tax returns on the usual deadlines so use this time to get ahead of the game and sort out what your 2019/20 tax year figures look like now. It is a deferral but may help some with cash flow.
We have had over 10 years of the equity markets trending upwards, for some this will be the first taste of a market downturn. For others their second or third. Each market downturn has its unique circumstances, but the same result, each leavings its little scars. It is important to remember why you are investing and that for most it is for the mid to long term. The worst course of action is to crystalise the losses by encashing, it is better to sit tight and weather the storm, they do pass.
Warren Buffet the renowned investor stated, “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”. The entry point into the equity markets is low, it may of course go further and we are likely to have continued volatility, but if you are happy to invest for the mid term there are opportunities.
We can only imagine the pressures that you are currently facing. As we emerge from this some will be in better financial shape, others may have suffered. You spend your time ensuring others are cared for, so surround yourself with people around who will look after you. Financial advisers and accountants are there to help you with money matters.
Legal and Medical is authorised and regulated by the Financial Conduct Authority (FCA). This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice.