Financial expert Alec Collie shares his insights into what new practice managers or GPs should be giving some thought to when it comes to looking after their own financial health
Whether a first-time practice manager or newly-qualified GP, your attention is, understandably, likely to be firmly on the heavy demands of your day-to-day job.
But it’s critical that you also keep your personal financial situation in mind. Here are some key areas to consider:
1. Protect your income
One of the first things I always suggest new professionals think about is income protection.
If ill-health, physical or mental, ever keeps you from working, it can have a real impact on your finances and your quality of life.
As a starting point, you should ensure you are clear on your entitlements when it comes to sick pay. If you are salaried – what does your contract say? If you are a partner, what does the partnership agreement set out when it comes to income during times you’re off sick – and do you have any responsibilities to maintain service, such as hiring locum cover, during these periods?
Income protection kicks in when your sick pay ends, providing an income every month to make sure that you can meet all of your regular, and any specific, outgoings. Policies can be tailored to your requirements and preferences, for example, the level of cover, or exactly when it jumps into action.
While it’s not a cheery prospect to think about, It’s important to plan ahead for all eventualities. Having a policy like this in place can give you invaluable peace of mind, along with financial security.
2. Think about pensions
If you’re a GP or a member of practice staff, you’ll likely be eligible for the NHS Pension Scheme and will be automatically enrolled.
Unlike most private sector schemes, it is currently a ‘defined benefit’ scheme that guarantees a fixed sum when you retire.
The scheme also includes other benefits, including lump sum death benefit , which would be paid to your legal spouse, registered civil partner or nominated qualifying partner if you passed away before retiring or within five years of retiring.
You can opt out of the NHS pension if you wish but it’s always recommended that you discuss this with a financial adviser first as the benefits can be expensive to replicate elsewhere.
If you’re a GP and you plan to do private work, your ‘pensionable earnings’ will be lower than if you only do NHS work. If you plan to do both private and NHS practice, it may be beneficial for you to also set up a private pension to help maximise your potential retirement income.
Again, this is something that a financial adviser can help you with.
3. Manage different income streams
If a new GP is doing, or plans to do, private work as well as their NHS work, it’s critical to be aware of the other implications beyond pensions.
Tax is one. Having an NHS and private income can make financial circumstances more complex, and some GPs may find that it ends up becoming more tax efficient for them to incorporate themselves as a limited company, for example.
Looking back to income protection, doing more private work can mean NHS sick pay cover reduces or is even lost altogether, meaning the requirement for cover is heightened or changes.
4. Have regular financial health check-ups
Time is at a premium for all those in general practice. But it’s important to hold some time to conduct regular financial health-checks for yourself, if you can.
This is an opportunity to check – or set – your financial goals and pinpoint where you might value some additional support or insight into the complex financial issues that can come with things like the NHS pension scheme.
Within these catch-ups, make sure you’re thinking about both the short-term and long-term plans. It’s never too early to start thinking about what sort of retirement you want, and getting a head start maximises the chances of being able to deliver on your goals.
Half an hour, every few months, may be all it takes. But it can pay real dividends in the long run.
5.Start saving
You may also want to make sure that you’re building your own financial resilience through saving.
A useful rule of thumb for approaching personal finances is the ‘1/3 rule’ – spending 1/3 of your income on ‘essentials’ like housing, insurance, tax and utilities; 1/3 on ‘every day spends like food, cleaning and commuting and non-essentials such as holidays and then saving the final 1/3 into an emergency fund.
As a general guideline, it’s a good idea to have three to six months’ worth of your average expenditure in savings that you can easily access in case of unexpected surprises.
Alec Collie is head of medical at specialist financial services provider, Wesleyan Financial Services
