Selling your practice before your retirement date, whether you want to move into working as an associate or pursue a new career, is becoming increasingly popular. But, how do you maximise the funds you have worked so hard for, to make sure you get the best return?
Below, Michael Copeland, Area Manager for Wesleyan, shares his top tips about how you can financially plan and invest the funds from selling your practice.
1. Seek good advice that meets your specific goal
Having an objective in mind for what you want to do after you sell your practice makes you far more likely to successfully save the money you need to turn your plans into reality.
Whether those plans are short or long-term will have an impact on how you manage your money. If it’s short-term you may well want to be able to access your money easily, while, for a longer-term plan, you might be able to put it away for longer and take more risk.
To ensure you can make your money work for you to help you pursue your dreams, it’s well worth speaking to a Financial Consultant who can best advise you in how to plan successfully.
2. Pensions – a tax-efficient option
If you’re looking for a medium to long-term investment, a pension is a tax-efficient option to consider. Ideally you want to hold a pension plan for a minimum of five years. The minimum age you can take pension benefits is fifty five.
Contributions into a personal pension attract tax relief at the basic rate. Any additional or higher rate tax can be reclaimed through your tax return, although tax treatment may change in the future. Each year, you can benefit from tax relief on pension savings up to £3,600 or 100% of your annual earnings, if higher.
There are also Annual and Lifetime Allowance limits to the amount you can save into your pension. The Annual Allowance is the amount that you or someone else can save on your behalf into pensions during the year. For 2017/18 this is currently £40,000. Any savings above this limit will be subject to a tax charge. The Lifetime Allowance is the amount that can accrue in pension savings over your lifetime without incurring a tax charge.
You can use your pension savings in a variety of ways to meet your future needs. For example, you could use all or part of your fund to purchase a guaranteed regular income for life. Or, you could take regular withdrawals or lump sums as needed to supplement income or pay for one-off expenses, such as a holiday or new car. You may also be able to take up to 25% of your pension funds as a tax-free lump sum.
3. Individual Savings Account
An Individual Savings Account (ISA) is another tax-efficient way of saving that allows you to save up to £20,000 across all types of ISAs in a tax year. Cash savings can be immediately accessible (although some ISAs may impose a penalty for withdrawals at short notice), but investment into stocks and shares should be viewed as a medium to long-term investment (at least five years) to counteract any short-term volatility in the market.
4. Savings account options – access cash while earning returns
You can save your money in a range of products which, by predominantly holding your funds in cash, gives you access to your money whilst earning modest returns and offering security. There’s a range of options available, such as cash ISAs, plus fixed and variable interest rate savings products and accounts.
5. Investment Bonds
Investment bonds are life insurance policies where you invest a lump sum in a variety of available funds. Some run for a fixed term, others have no set term, and some offer various guarantees and other income options.
As you can see, there are a lot of options on how best to manage your money. With something as important as your savings, it is important to seek expert financial advice to assess your individual circumstances and requirements to help you make the right choice.
Please remember the value of investments and any income can go down as well as up and you may get back less than you invest.
The above information does not constitute financial advice. For further information, please speak to your financial adviser. Wesleyan provides specialist financial advice and products to dentists. For more information, visit www.wesleyan.co.uk
