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Is retiring at age 60 going to be a pipe dream or reality?
Max Spurgeon, specialist independent financial adviser (IFA) to doctors and dentists, explains why he recommends clients consider drawing their pension at 60, even if they wish to continue working.
What’s the Normal Retirement Age (NRA)?
There is an intense pressure from the Government to move the normal retirement age for doctors and dentists from age 60 to 65.
Anyone joining the NHS after April 2008 already has a Normal Retirement Age (NRA) of 65.
Even those who joined the NHS before April 2008 are being incentivised to move to the new NHS Pension Scheme (2008) and thereby an NRA of 65.
Irrespective of what scheme you’re in, Lord Hutton’s recent report suggests that all public sector pensions be linked to the state retirement age which is heading towards age 66.
 When do you want to retire?
When questioned about what age they want to retire, the majority of doctors and dentists that we speak to are understandably a little uncertain.
There is, however, a common theme. If they are going to work past age 60, it would ideally be through choice than necessity.
I am hoping that retirement for most is something that should be enjoyed. Is this still possible if you are forced to retire at age 65 or even 66?
Whilst Normal Longevity will take most of us into our late seventies or early eighties, mobility becomes more restricted the older we become. Are you still going to be physically able to enjoy your retirement to the same degree at age 65 as you would at 60?
Just as importantly, how does retiring at 65 versus 60 affect your pension?
When should you retire?
Let’s compare, for example, one person who retires at age 60 (Dr A) and his colleague (Dr B) who continues to work until age 65.
Dr A
 Dr A has 36 years service and a superannuated income of £100,500 at the time of retirement. This is the top level of the consultancy scale or, if he/she’s a general practitioner, it could be his/her career revalued earnings.
Dr A’s default pension would be £45,225 per annum with a tax free lump sum of £135,675.
Dr B
 Dr B enjoys working and continues to do so to age 65. I was going to assume that he/she has an inflationary increase on their salary, but currently this is a little optimistic.
By working to age 65, Dr B has contributed into the NHS Pension Scheme for a further 5 years compared to Dr A. This has cost Dr B in the region of £37,687.
From age 60, Dr B has also not drawn the index-linked pension from his/her scheme, equating to in the region of £226,125. £226,125 plus £37,687 totals £263,812.
Having worked 5 more years than Dr A, Dr B will have a larger pension at age 65, receiving in the region of £51,506 per annum and a tax free lump sum of £154,518.
Here I’m going to largely ignore the tax free lump sum as, had Dr B drawn from the pension at age 60 and achieved 5% growth, the lump sum would be in excess of £154,518.
 Dr A vs Dr B
Based on the above scenario, Dr B is in a position where his/her pension is £6,281 per annum greater than Dr A. BUT the cost of this extra pension is astronomical!
It is unlikely that Dr B will live to recover the costs of working through to age 65.
The caveats!
As with any calculations of this nature, I need to point out some of the restrictions of my calculations. There are a number of factors that do have an influence on these figures, such as inflation and tax.
Although such factors may influence the figures, I would suggest that the end results may not alter the outcome in a dramatic fashion.
Flexible retirement, whereby you draw your pension and continue to work, can seem a sensible option for many medical professionals.
If you have Clinical Excellence Awards (CEAs), you may also have to consider your position as these are lost on drawing your pension.
If this article is of interest and you’d like to find out more, contact your Legal & Medical financial adviser or email us at
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Article by Max Spurgeon
Director and IFA to Doctors and Dentists at Legal & Medical Investments
July 2011
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