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How a new pension plan for physicians will help provide peace of mind

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On top of doctors’ heavy workload of caring for patients — particularly during a pandemic — they are also responsible for managing their medical practice and their personal finances. 

The latter is a larger source of stress than many may expect. Most physicians operate as self-employed independent contractors and the vast majority of Canada’s more than 90,000 doctors do not have a pension plan. 

After factoring in the expenses of day-to-day operations, and paying down the large student debt they incurred to become physicians, saving for their golden years may not happen in earnest until they are in their 40s.

“One of the great challenges of being a physician and being paid a fee for service, or even salaries, is that your retirement has no pension and so you are responsible for overseeing the investment of that, and the anxiety that comes with that,” said Dr. Christian Finley, a thoracic surgeon at St. Joseph’s Healthcare Hamilton. 

“It means that physicians probably work longer or harder than they want, to save more than they need. They don’t have economies of scale, and so they sometimes don’t get the best returns.”

“The concept of a pension has been something physicians have been talking about for time eternal. And the fact that it’s actually come to fruition is somewhat of a miracle.”

In March, MD Financial Management and Scotiabank announced they were developing a multi-employer pension plan designed specifically for Canadian incorporated physicians. Called the Medicus Pension PlanTM, it would allow physicians who join the plan to pool their investments, taking advantage of lower fees through economies of scale and reducing individual risk. The Medicus Pension Plan will provide a lifetime defined benefit pension based on a physician’s personal earnings and years of service. 

It’s the first multi-employer pension plan for doctors, providing a source of predictable retirement lifetime income that physicians have long been asking for, said Daniel Labonté, President and CEO of MD Financial Management.

“This pension brings a level of certainty to your outcomes that wasn’t there before. Financial peace of mind has been core to MD’s foundation since day one – it is our purpose. We’ve been specializing in physician-based advice from a financial-planning perspective. This pension plan becomes one more tool in that planning arsenal. This tool introduces a number of characteristics that were not previously available:  retirement income predictability, spousal benefits, and pooling of investment and longevity risk. Most importantly, it is another offering that allows physicians to be focused on their patients. ”

One of the great challenges of being a physician and being paid a fee for service, or even salaries, is that your retirement has no pension and so you are responsible for overseeing the investment of that, and the anxiety that comes with that Dr. Christian Finley, Thoracic Surgeon, St. Joseph's Healthcare Hamilton. The ability to pool resources among multiple physicians is key, said Simone Reitzes, Managing Director of the Medicus Pension Plan at Scotiabank. A larger pool of assets can invest in asset classes that typically aren’t available to individual investors, such as private equity and infrastructure, she added.

The indefinite time horizon of the pension plan allows for a more aggressive investment strategy as compared to the risk profile of an individual physician, she said. “All else equal, the ability to take on more risk  has historically resulted in higher returns and more substantial benefits.”

The development of the Medicus Pension Plan comes at a particularly difficult time for doctors in Canada. Doctors on the front-line of this pandemic, working long hours caring for COVID-19 patients in short-staffed hospitals, are exhausted, Finley said.

“You’re burnt out, just absolutely burnt to a crisp,” said Finley, who has also been taking care of COVID patients. Meanwhile, other physicians with specialist capabilities have seen a drop in work and procedures have been postponed or cancelled due to the pandemic, as well. 

“Ophthalmologists, gastroenterologists, and orthopedic surgeons, people who do elective procedures, they lost years of work. I know of doctors who had a difficult time because they took on personal and business financial commitments. Many specialists who worked in areas that were completely eviscerated. Some were doing vaccine clinics just to pay the bills.” 

Rising inflation has put extra pressure on doctors, said Finley, who also sits on the MD’s Physician Council.

“At first pass, you would say doctors do very well and so they should be fine in retirement. You spend a lot of time in medical school learning how to deal with skin cancers or congestive heart failure, but exactly no time being taught how to manage your money. Hiring staff, renting an office, all those business decisions are something that people feel woefully unprepared for.

“So, on top of those long days and responsibility for running a small business, you also have to be responsible to make sure you have enough money in the long run. The money you have left over at the end of the month, week or year, you have to invest yourself.”

Finley is eager to sign on to the pension plan, and anticipates many other doctors are as well. 

Development of Medicus is underway, and it is expected to launch within a year, subject to applicable regulatory approvals. 

“Having a foundational core amount of money that I know is going to come will provide me security and provide me peace,” he said.