Is EARLY retirement possible?

wheretostart_2

Hi
I'm 35 and in the fortunate position where I'd like to make very significant pension contributions for the next 10 years and then retire at 45 taking an income from this 'new' pension until I'm 65 when some older pension arrangements will begin to pay out. Is it possible to find pension schemes like this .... that allows you to make significant contributions so that you can retire early (age 45) - and obviously I want to make these payments directly from my salary to get the tax benefits.

Thank you in anticipation of the advice.

exil

Well, a PENSION scheme is not allowed to pay out before age 50 (until 2010, 55 thereafter - so because you're still a mere youngster, you can't retire before 2025)

However, nothing to stop you investing in ISAs, shares, property etc, then converting this at age 45 into income-generating investments or even buying an annuity. But - your money isn't going to grow very much over 10 years.

Do you REALLY want to "retire" at 45 - or is it really more of a career change - eg seeking a more interesting and rewarding but less lucrative job, using the "pension" to
cover the loss of income? The thought of sitting in a deckchair watching the lawn grow for 35-40 years doesn't appeal to me.

ReportInvestor

The minimum age at which you will be able to draw cash from your pension will rise from 50 to 55 in 2010.

So you will have to look to save outside a pension through ISAs, equities, property etc.

simonhgreen

To be able to put away enough in next 10 yrs to sustain you for the following 20yrs seems a really tall order to me, whatever investments do in that period.

Also, the products that you rely on at 65 - will they be paid into over the next 30 yrs?

wheretostart_2

Thanks for the feedback. Yes, the reason for 'retiring' earlier than usual was really to take a step back and do something more rewarding (although a lot less income, maybe zero). I don't relish the thought of doing nothing for the remaining 45 (ish) years either.

So whilst pensions won't pay out before 55 the next best option is ISA's and other investments (whilst ISA's have the tax breaks I'm not sure what other investment types can be tax efficient - any advice?). As you can tell I'm a high rate tax paying, paying through the nose at the moment and am looking for ways to cut taxable amount to under the 40% level. Pensions are the only way I know of doing this.

dunstonh

whilst ISA's have the tax breaks I'm not sure what other investment types can be tax efficient - any advice?

Tax efficient would depend on circumstances. If you were going to be a higher rate tax payer at the start but a basic rate tax payer in the future, then investment bonds would be more efficient than unit trusts/oeics. However, its the other way round for basic tax payers.

If you are always going to be a higher rate tax payer, then investment bonds could still benefit you but you are not going to be able to avoid paying some extra tax.

exil

Actually, I quite like being a high-rate taxpayer. When I consider the alternative (see other forums full of people up to their waists in debt). Bit like the joke about getting older isn't bad when you consider the alternative.