Have you reviewed your income protection lately? Specifically, have you reviewed your cover since joining the 2015 NHS Pension Scheme? It is always important to carry out regular reviews of your financial products but even more so in this situation, as you are highly likely to be financially exposed. Here is why…
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it.
Income protection stops at age 60 or 65
Income protection insurance generally stops paying out at age 60, or 65, depending on your policy.
In addition the 2015 NHS Pension is now linked to the State Pension age, meaning you may not be able to draw your pension funds until you reach age 68.
Forecasts for State pension age are as follows:
- 66 years old by 2020
- 67 years old between 2026 and 2028
- 68 years old between 2044 and 2046
Rising pension ages could leave you with a financial gap
If you suffer a serious injury, or become ill and unable to work, typically you can claim on your income protection insurance. However, after your income protection insurance runs out and until your pension kicks in, you could find yourself financially vulnerable in the event of unfortunate situations arising.
With this case, there could be up to an 8 year gap of financial exposure. The younger you are now, the wider the possible financial gap.
In addition, the 2015 NHS Pension scheme may pay out less if you retire early due to ill-health.
What action can you take?
Firstly, it is important to review your income protection policy.
Does it pay out until age 60 or age 65, as this could make a marked difference in your risk.
If you find yourself in the situation, where your income protection expires yet your pension is pending whilst you wait for the official deadlines, then you have a few options:
- Draw of previous savings to cover the financial gap
- Take your pension early, but with the cost of a penalty for doing so and most likely suffer an income shortfall through your retirement
- Adapt your lifestyle to suit what you have available, until you are able to draw your pension
Clearly, these options are likely to not be desirable.
One initial option could be to extend your income protection policy to maximise the cover.
Another could be to consider paying into a personal pension to act as security. With the new pension freedoms you will be able to draw this type of pension after age 55.
Working with a financial adviser can help to ensure you are building your wealth, maximising your retirement income and prote
Review your income protection policy
Dental & Medical Financial Services have been helping doctors and dentists with wealth and income protection for over 25 years. Call to discuss your options with Darren:
Tel: 01403 780 770
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