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Independents' Day

How I built my retirement nest egg

Dr John Couch shares his experience of creating a portfolio of investments to top up his GP pension

Dr John Couch shares his experience of creating a portfolio of investments to top up his GP pension

If I'm honest, I didn't give retirement a thought until I was 34. What prompted me was attending the retirement party for one of my original GP partners, who left aged 60. To me this seemed a little young as the only retired people I knew had finished work at the traditional age of 65.

When I chatted to him briefly on this subject during the evening he gave me advice that I have never forgotten. ‘Your early years of retirement are always going to be your healthiest.

Try to retire at 60 if you can.' As he is now a fit 82 and one of only two survivors from my original partnership of seven, I think his strategy was absolutely right.

Sadly, although I would have liked to start building capital immediately, I had other more pressing priorities at that stage in my life. As a father of four and the only breadwinner, my net income was tightly committed for a few years more.

I did, however, set up a strategy for pension and capital planning that I could start enacting at the earliest opportunity.

NHS pension

I researched my NHS pension and realised that as a full-time GP with unbroken service I had an excellent start. At retirement the tax-free lump sum, at three times the annual pension, will form the nucleus of my nest egg.

Over the years I have calculated and updated my projected pension and approximate post-retirement expenditure. Luckily the projected pension and lump sum has risen in line with GP earnings.

I have kept all of my superannuable income statements and every three years have asked the NHS pensions agency for a pension forecast. I will ensure I check at age 57 and 59 in the run-up to retirement.

I also quickly realised that if this was our only source of post-retirement income, my wife and I would have to reduce our current lifestyle.

Extra pension

By the time I was 40 I found that I had a bit more surplus cash and occasional lump sums. I researched added years for my NHS pension. At that time the cost, for four added years, would have been 3.8% of superannuable income.

Payment would also rise in line with earnings. I compared this with the current NHS additional voluntary contribution scheme (NHS AVC) and noticed that for a lower and fixed monthly outlay the return projected a better final extra pension.

I chose the AVC – and could not have been more mistaken. The NHS AVC at that time was with Equitable Life, which crashed badly a few years ago. I baled out into an alternative NHS AVC provider but this and diminishing returns meant my optimistic projections have been unfulfilled.

My only consolation is that with added years I would now be paying almost three times as much per month as my AVC while the projected AVC pension will be around half that of added years.

I also realised that I would be likely to pay 40% tax on some of my pension income, whereas my wife would pay basic rate. As she had no other pension I decided to take out a private pension for her 16 years ago and more recently a stakeholder pension.

Finally, I have been able to invest lump sums in private pensions for private work that I have done over the years. Both my own and my wife's funds are in managed and unit trust funds. Using a moderate risk strategy these have done well over the years and in total should give us a 20% boost to my NHS pension.

Recent changes also allow up to 25% of the pension pots to be taken as a lump sum, with a reduced pension. I will decide nearer retirement whether our nest egg needs this boost and will continue to monitor our funds every three months.

All of the above pension payments have been set against tax.

Stocks and shares

I once read that one should have about a third of capital invested in shares. At age 40 I also began to invest small monthly amounts into unit and investment trusts.

I studied the financial section of our newspaper regularly and as my confidence grew also invested occasional lump sums. My risk varied from moderate to high and over the years returns have been good, with my best returns from emerging market investment trusts.

I did briefly buy a few shares in individual companies but had little success. Indeed one company in whom I had invested a few hundred pounds went bust so I have stuck to funds ever since. I monitor prices monthly and tend to be a long-term investor. I will continue to invest into retirement but probably not more than 25% of capital.

Cash investments

My wife and I have bought cash ISAs regularly for several years. The tax benefits are good but we have changed company a few times when rates have drifted downward. I monitor rates every month.

We both have high-rate internet savings accounts for our spare cash. Once again these have been moved occasionally if rates become less competitive.


Our practice owns its premises and I have a share of this. The notional rent was helpful in servicing my loan and now that this is paid off, the extra income is very welcome.

The lump sum released when I retire will be an excellent addition to my nest egg, although recent capital gains tax changes have made a bigger dent than anticipated. Over 25 years the value of my property share has gone up by a factor of eight despite recent falls.

It is worth noting that the amounts I have been able to invest have increased as I became older and the demands of children subsided. This will be the case for most GPs.

Generally I am satisfied that our projected income and nest egg in retirement should allow us reasonable security and choice. I can only hope for many years in which to enjoy it!

Dr John Couch is a GP in Ashford, Middlesex

Dr John Couch: I didn't give retirement a thought until I was 34 Dr John Couch: didn't give retirement a thought until I was 34

I once read that one should have about a third of capital invested in shares.

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