Being a Doctor or Dentist whilst divorcing in England and Wales or being the spouse of a Doctor or Dentist during such proceedings means that specific aspects need to be taken into account.
Divorce is a financial turning point, especially for doctors and dentists with NHS pensions and potentially lucrative private work also being major factors. Unlike typical assets, these require specialised handling to avoid costly mistakes. This guide covers pension division strategies, tax issues, and how to safeguard your earnings—both NHS and private.
- The Unique Value of NHS Pensions in Divorce means that the NHS pension can sometimes be a couple’s most valuable asset—exceeding property or savings.Key facts:
Defined Benefit (DB): Unlike private pensions, NHS pensions guarantee lifetime payouts and are also indexed linked potentially making valuation and division more nuanced.
CETV (Cash Equivalent Transfer Value): This figure (provided by NHS Pensions) is used in settlements but can sometimes underestimate true long-term value — for example a £1M CETV could equate to £2M+ in lifetime benefits.
- Remember there are some scheme-Specific Rules:
- 1995 Section: Full pension at 60; early divorce may mean sharing "unearned" future benefits.
- 2008/2015 Sections: These schemes are less generous. They have higher retirement ages and considerable actuarial reductions apply if taken earlier than those retirement ages. They are designed to ensure that less highly experienced staff retire in their late 50s than did under the older schemes.
Strategic Tip: If you are the member of the scheme then potentially argue for a "lower CETV adjustment" if your former spouse seeks a share—the NHS scheme’s valuation method can overstate transfer values.
- Private Income: Bonuses, Locum Work & Partnerships
Private earnings (e.g., consulting, cosmetic work, or dental practice profits) are fully disclosable in divorce. Some pitfalls to avoid include:
- "Notional Income" Risk: If you seek to reduce private work pre-divorce, courts may impute earnings based on past years. The court works on earning capacity and the best way to work out someone’s earning capacity if they have been working is to look at what they have earned in recent years. It may well be that a change of circumstances may mean that after the divorce could mean that you are unable to undertake as much private work – for example if you need to be more available to look after the children.
- Business Assets: For practice owners, valuations may include not only tangible assets such as property and equipment but also potentially goodwill (e.g., a dental practice’s patient list). This should be considered by both parties. The Practice owner is obviously incentivised for the good will to have as low a value as possible whereas the opposite is true for their spouse.
- Tax Efficiency: Private income is often taxed via dividends or retained profits. Where possibly you should seek to structure settlements to minimise higher-rate tax exposure for the paying party. The spouse should consider not only what the practice owner is drawing out as income but also what they could be drawing out as income – i.e. it is normally sensible to only draw out the income that one needs rather than all the income that you could take. The paying party could also consider an MVL if the Ltd company owning the practice is simply holding a holding vehicle.
Key Move: Provide 3+ years of accounts to prove full income trends—not just the last year.
- Pension Sharing vs. Offsetting: Which Suits You?
Pension Sharing - Provides a Clean break; former spouse receive a % of the pension scheme which is normally carved out for them. This will reduce the original pension scheme member’s pension income entitlement permanently.
Offsetting – This could mean keeping the full pension (or more of it) by trading other assets (e.g., home equity). In the first instance, it would normally requires substantial non-pension assets that can be offset against the pension.
Offsetting can be helpful if for example there is an age gap between the parties and the older spouse considers retirement income as a more important issue.
Case Example: A consultant with a £1.5M NHS pension and £800K home might offer 60% of the house to retain 100% of their pension.
- Tax Traps & Opportunities
- NHS Pension Lump Sums: Like other pension schemes these are tax-free up to 25%, but sharing this in divorce requires careful drafting.
- Private Income Streams: Maintenance payments from private earnings are not tax-deductible.
- CGT on Practice Sales: If divorcing forces a practice sale, Entrepreneurs’ Relief may apply. As above, alternative routes on disposal for example an MVL may be available.
- Post-Divorce Recovery Plan
- NHS Pension Top-Ups: If some of your pension has been subject to a pension sharing order the you can potentially use Additional Voluntary Contributions (AVCs) to rebuild your pension.
- Private Work Restructuring: If you have not done it already consider a limited company for future private income to shield assets.
- Ensure that you are aware of your former spouse’s activities relating to new employment if you are paying spousal/global maintenance. Spousal maintenance or the spousal element of global maintenance is designed to meet income needs only – in English law we do not simply “share” income. Consequentially if their income is going up to a level not necessarily expected or planned for then the spouse paying the maintenance can potentially seek to vary the amount they pay downwards (or perhaps even cease spousal maintenance payments altogether, depending on the circumstances).
- Expert Team Checklist
Ensure your advisors have:
- Experience with NHS Pension Agency valuations
- Forensic accounting advice available for private practice income
- Knowledge of "McCloud Judgment" impacts** (remediation for older NHS members).
- Relationships with outside advisors for example insolvency/restructuring experts.
Bottom Line
For senior clinicians, divorce isn’t just emotional—it’s a financial recalibration. By prioritizing NHS pension protection, accurately disclosing private income, and leveraging tax-smart strategies, you can secure both immediate stability and long-term wealth.
Act Now:
- Request your NHS CETV immediately (as recent headlines show, these can take months to obtain).
- Consult a divorce solicitor with NHS pension expertise.
If you are looking for experienced, pragmatic and cost-effective advice on a family law matter please contact Aziz Malik: azizmalik@bexleybeaumont.com | 07966 375115
