Personal Pensions for Doctors & Dentists

Whilst the NHS Pension Scheme certainly forms the backbone of our clients’ retirement plans, in many cases, supplementary planning is not only also required but it has huge tax advantages too.

A personal pension is a highly tax efficient savings vehicle with tax relief granted at 20% for basic rate tax payers and 40% for higher tax rate payers. That means that for every £1 invested by a higher rate tax payer, the net cost to you after tax relief is 60p. As with ISAs, however, there are restrictions around how much you can invest in a personal pension. 

What is a Personal Pension?

The purpose of a personal pension is to provide you with a regular income in your retirement. This income is built by paying a regular amount into your pension, normally every month or every year, or a lump sum. 

The pension fund is invariably run by financial organisations such as building societies, banks, insurance companies and unit trust companies who will invest your money on your behalf.

The final value of your pension fund will depend not only on your contribution amount but also on the choice you make as to where the money is invested.

On Retirement

When you choose to retire, you can take 25% of your pension fund as a tax free lump sum, up to a maximum of 25% of the lifetime allowance (£1.8 million for 2010/2011).

You then have 2 basic choices. You can either:

• use the rest of your fund to purchase an annuity which will provide you with a regular income payable for life, or
• draw an income from your fund whilst retaining control of how and where your fund is invested - arguably, this provides better death benefits.

There are exceptions to the rule but, on the whole, these are currently the two main options available with a personal pension. 

The availability of a third option from 2011 has been intimated by the Government. 

If you can prove you have a guaranteed pension of at least £20,000 per annum, you could be able to fully access your personal pension. This would allow you to draw your tax free lump sum before removing the remaining fund and paying tax at your marginal rate. 

Personal Pension Planning with Legal & Medical

To find out how Legal & Medical can help ensure optimal fund performance of your personal pension, whilst taking full account of your individual attitude to risk and retirement goals, contact us today or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it

The tax reliefs referred to throughout this website are those currently applying in the United Kingdom to UK Tax Residents. These tax reliefs are liable to change. The value of any tax relief available will depend upon the individual circumstances of the taxpayer.