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Personal Finance - Young GPs' financial priorities

In the second of this five-part series, Phil Mileham has money advice for GPs starting their careers.

Moving home: it is difficult to predict how the housing market will perform, but there are some good mortgage deals available if you are prepared to do some research (Photograph: Istockphoto.com/LordRunarLordRunar)
Moving home: it is difficult to predict how the housing market will perform, but there are some good mortgage deals available if you are prepared to do some research (Photograph: Istockphoto.com/LordRunarLordRunar)

Once you have completed your vocational training and are a newly qualified GP, you are likely to start out in general practice in a salaried job or working as a locum.

Becoming a GP partner may be your ultimate aim but partnerships are in short supply in many areas. Whatever path you choose, you must take care of your finances as well as your patients.

Get protection
Protecting your income should be the cornerstone of your financial planning at every stage of your career.

GPs know better than most that people sometimes fall so seriously ill that they are unable to work for long periods of time. An income protection plan will pay you a regular tax-free income at, typically, around 50 per cent of your pre-incapacity earnings.

If you are a salaried GP, you may receive sick pay from your practice: check your entitlement in your contract before deciding what additional protection you need.

You can then buy an income protection plan with a deferred period. This is the length of time you must wait following incapacity before the plan starts to pay out. You can choose a deferred period that suits your situation, up to a maximum of 52 weeks usually.

So if you receive full sick pay from your practice for two months, for example, a deferred period that starts to pay out after this might be appropriate.

If you are locum GP however, you may have no sick pay to fall back on. In this case you might opt for a plan without a deferred period to ensure immediate payment.

You should also be aware that some income protection policies will require you to work a minimum number of hours each week (while well) for the cover to be valid. And you should also check that you are covered for those times when you are between jobs or roles.

You should review your savings regularly and avoid letting large sums of cash build up in your deposit account.

With interest rates at a record low, not only are you earning less interest on your money, but rising inflation can erode the value of your savings and reduce the buying power of your income.

Of course it always makes sense to have an emergency cash fund available to cover you during a period of unexpected expenditure. However, it may also be appropriate to look at building up a varied savings portfolio including some shares-based investments to secure better returns over the long term.

As you are likely be a higher rate taxpayer you should make your savings as tax-efficient as possible. For most, this will mean utilising your full annual individual savings account (ISA) allowances as well as looking at other tax-efficient savings products.

Moving up
If you have relocated to take up a new position, you may be looking to buy a new home. Or you may even want to move up the property ladder now that you are earning as a GP.

While the housing market has shown signs of recovery recently, it is still difficult to predict with certainty what the future will bring. There are some good mortgage deals available at the moment, but you need to do some research.

As it takes time and effort to find the best deal for your long-term needs, you might therefore decide to ask an adviser to do the job for you. Make sure you go to an organisation that will compare the whole of the mortgage market and not focus on a limited number of providers.

Starting a family
Female GPs considering starting a family need to bear in mind the financial considerations of taking time off work to have a baby and the subsequent costs of bringing up a child.

Regular saving now to supplement your income during maternity leave or if you decide to reduce your work commitments for a time, can potentially ease the financial pain considerably.

Women GPs should also check that any income protection cover they have includes incapacity arising during maternity leave.

Retirement
All through your working life, retirement planning should be on your horizon. While the NHS Pension Scheme (NHSPS) is currently a generous scheme, you will probably want to consider other long-term savings provision.

The recently published Hutton report proposed comprehensive reform of public sector pension schemes which, if adopted, could reduce your potential retirement income from the NHSPS.

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