When I was 16, looking around me, I knew I could do better. With good grades at school, my parents and teachers started pushing me to think about a career. I wanted a way to improve my life chances. Coming from an average town, the collective mindset that pervaded me was getting a job, and the higher pay, the better. When I suggested doing medicine, everyone was delighted. A high paid job that would set me up for life! But 20 years down that path, does that assumption that a medical career would be the pathway to security, wealth and freedom still hold up?
A career in medicine is often thought of as a high-paying, secure job. But is that the case?
In this post, we'll look at three key myths about why you may have been misled about the financial realities of a career in medicine.
Myth 1 - A career in medicine will mean you are financially set for life
A medical career is less financially secure than you think. Pay cuts in real terms, erosion of NHS pensions and unwanted tax bills are making it harder for doctors to make ends meet. The average GP now takes home just £50,000 a year - a pay cut in real terms of more than 10 per cent since 2010. According to the Nuffield Trust, all doctors' pay is down 7.9% between 2010-2020 and for consultants, this figure is 12.9% in real terms. And with rising inflation, real terms pay will only get smaller.
The erosion of NHS pensions is also eating into doctors' incomes. With the tapering of the annual allowance, many doctors face large, unexpected tax bills on their pension contributions. It's no wonder that one in three GPs is considering quitting the profession. All this means that a medical career is no longer the safe, secure and well-paid job it once was. It is likely that in the future, medics will see more financial insecurity than ever before.
Myth 2 - Your NHS Pension will look after you in later life
The NHS pension is an important source of income for many people who have dedicated their lives to working in the health service. However, recent changes to the pension scheme have left many facing an uncertain retirement future. The switch from a final salary scheme to a CARE(Career Average) scheme means that pensions are no longer guaranteed to keep pace with inflation. In some cases, this is a 30% reduction in the benefits paid compared to previous schemes.
As a result, there is a real risk that the NHS pension will not be enough to support people in their later years. This reduction in benefits is a cause for real concern, and why it is vital for those working in the medical sector to increase their financial education.
Myth 3 - A secure income comes from work
Many healthcare workers fall into the trap of getting a secure job, working hard and climbing the ladder. Exchanging time for money over and over again with the illusion that this provides security. The problem with that approach is that earned income is the least secure type of income. This insecurity is because earned income relies on continued employment, and a healthcare worker's circumstances can change at any time. For example, if healthcare workers become ill or injured, as many were during the recent pandemic, they may be unable to work and lose their earned income. Additionally, earned income is also susceptible to changes in the economy. For example, if there is a recession, healthcare workers may be laid off or reduce their hours, decreasing their earned income.
In contrast, passive income is not reliant on continued employment and is not affected by job changes. For healthcare workers, passive income from investments such as rental properties can provide a more secure source of income. Improving your financial education rather than making assumptions about the future is key to financial success and security as you progress through your career. We will go into this in much more detail in future blogs.
So if life in a medical career no longer gives me the financial and job security that previously existed, what can I do about this? The key is improving your financial education. Do you understand the different types of NHS Pensions? Which scheme are you a member of? What benefits will it provide in retirement? Will I get one of the unexpected tax bills? When will that happen? How do I make up for any shortfall?
This is where the Building Out blog is here to help and provide information on financial topics specifically tailored to medics and healthcare workers.
If this has been helpful or you would like to improve you financial education:
- Follow us on Twitter at @BuildingOut (https://twitter.com/BuildingOut)
- For more free online information, visit www.diarmaidmcmenamin.com and sign up for regular updates.
