10 year plan

elster_2

I am 39 now and want to retire at 50.
I own a 250k house with no mortgage and have been using my ISA allowances for the last 3 years etc, and have about 40k in savings in ICICI along with some shares amounting to say 10k.

I have just taken a new job with a pension arrangement of :
3% my contribution + 17% company contribution - cash fund
3% my contribution +3% company contribution - investment fund

all payable at normal retirement age - which is 55

salary - say 3,000 after tax per month

"spare cash" say 1200 per month ...



how to invest this ??

1. increase pension pot? (no further matched company contributions payable)
2. seperate retirement fund ?? who?/what?/??
3. some form of bonds?
4. property?
5. savings account ??
6. premium bonds and hope ??
7. others?


advice appreciated

Andy_L

elster wrote:

3% my contribution + 17% company contribution - cash fund

Morning, is that going into a cash fund because that's the scheme rules or simply because you havn't decided where to invest it?

elster_2

Andy_L wrote:

Morning, is that going into a cash fund because that's the scheme rules or simply because you havn't decided where to invest it?

cash fund = scheme rules

elster_2

any advice ??? must be some thoughts out there guys and gals ??

ReportInvestor

Well you could contribute more to a personal pension or a SIPP and still get 40% tax relief from the sums you mention.

That means 60p buys £1 of pension even without employer contributions.

At 55 you would, under current rules, be able to take 25p of each £1 of that fund as a lump sum (so 35p now effectively buys 75p of pension fund) but you mention retirement at 50 - so that may have its attractions or not.

I'd personally continue to max out my ISA contributions, making sure that your portfolio is balanced e.g. some UK, some equity income, some overseas, some commercial property. The ISA route, rather than the pension route, leaves you in control of your capital.

You've got a decent time span of 11 years before retirement and this fund could build up to something significant. Once you are retired you may still be able to adjust this ISA fund to produce more income e.g. some Corporate Bonds or PIBs if you wanted. You don't need to start with the investments you finish with. Switch more to income nearing retirement as part of a move to gradually reduce risk [but still allow for some growth and some income growth to take inflation into account].

You don't say if you think your existing pension arrangements would could make you a higher rate taxpayer in retirement. I suspect not - given no final salary pension scheme and the early retirement date.

If you think you are going to be a higher rate taxpayer in retirement, then that tax free ISA income could be even more valuable.

Property is a possibility, but you might have to cash in existing ISAs for a decent sized deposit - and it would leave all your eggs in the one residential property basket.

You might also consider how long people in your family tend to live. If very long then a pension is worth more consideration. If there is a history of heart attack / stroke then you might be more comfortable with keeping control of your capital - especially if you have heirs - rather than giving all your pension fund up to an insurer in exchange for an annuity. [This refers to your possible additional pension, not to your existing employer contribution pension which you should almost certainly continue.]

cheerfulcat

elster wrote:

I am 39 now and want to retire at 50.
[...]

"spare cash" say 1200 per month ...

how to invest this ??

1. increase pension pot? (no further matched company contributions payable)
2. seperate retirement fund ?? who?/what?/??
3. some form of bonds?
4. property?
5. savings account ??
6. premium bonds and hope ??
7. others?


advice appreciated

Hi, elster,
Keep in mind that for an income of £25,000 p/a you need capital of at least £500,000. To achieve that size of " pot " in a relatively short time you will need to take risks with your money. I don't think any of the things on your list can give you that sort of return and some - like cash and premium bonds - are positively dire.

I would say that the only way you can even remotely hope to build up that amount of capital is with stock market investments. Personally I would avoid any pension contributions over and above what the employer matches because the pension wrapper restricts your ability to get at the capital; I would also be very worried about the large proportion of your particular fund in cash, that's just insane IMHO.

You could consider making use of your £7000 p/a Maxi ISA allowance for part of your monthly investments, and perhaps set up a savings plan with a couple of the big global investment trusts with the rest. Alternatively, if you have the time and inclination, you could learn about buying shares directly.

HTH

Cheerfulcat

jonathon_hart

One problem here is that the government is changing the minimum age at which you can retire your pension to age 55 from 6 April 2010. Unless you have a contractual right to retire at age 50, which is unlikely, you will not be able to access your pensions until age 55.

Thanks

Jonathon