Investments to provide £1200pm income?

philng

There is a possibility of redundancy with my employer in next 6 months. We have £360000 of savings/investments currently approx of which £150k is in cash/stocks & shares ISAs. I am 46 & wife 52. Expected redundancy would be around £75k.

All current bills for house food etc = £1200pm with no loans or mortgage.

Wife earns £1800pm take home pay.

Would like to leave the daily rat race as soon as we can but not sure what we could expect to be able to get a return on our savings/investments?

I have an accrued index linked gauranteed final salary pension worth to date of £16000 pa (at age 60).

Wife has a number of different pensions which would amount to less than £8k pa.

Need to cover bills plus extra for regular holidays so somewhere between £2000 & £2500pm would be good.

How feasible is this?

atush

http://www.hl.co.uk/pensions/interactive-calculators/pension-calculator

but you will have to caluclate earning from your ISA cash and investments seperately. Dont' knwo how you can do this w/o knowing interest rates then but i guess you can guess at it?

Cash-Cow_3

Your financial situation is very similar to where I expect mine to be in 10 years (hopefully). After playing around with various on line tools and spreadsheets I worked out that my £350,000 or so I could make last about 10 years. This was fine as my pension would then kick in. I just couldn't earn enough from stocks to retain all of the capital and still get an income.

Jake'sGran

I noticed today whilst searching for other info that Trustnet have a list of income producing funds attracting money. There are five funds listed three of which are:

M&G Optical Income
M&G Corporate Bond
Newton Real Return

These and maybe others could form a part of your pension planning but would be better in ISAs except that you will still have a large sum to plan with.

edinburgher

Make your mind up - is it £1200/mth or £2000-2500?

If you call it £2000/mth and your combined pensions will be £24k/year, surely all you need to think about is whether or not your current investments will last the 14 years until you can claim your pension?

£360k + £75k = £435k

£336k (assuming £2000/mth spend until you hit 60 and your wife quits work as well). Leaving you with £69k (assuming you convert your investments into reliable, lower risk choices now and protect your capital)?

ChiefGrasscutter

Amazing.....a £75K redundancy payout - though it will be subject to tax on anything above £30K.

In my sector companies make people redundant to save money not to spend it
So everyone gets the government minimum plus a little bit.
For most people with long service that will be around £9K I suppose regardless of how high one's salary is - as salary levels above a certain sum are disregarded in calculating the Government minimum.

jamesd

Where is the £210k that is not in ISAs? Pension pot or just unwrapped investments?

Assuming it's all outside a pension then you can reasonably expect to take 6% or so income and on £360,000 that would be £1,800 a month.

These are the ones I currently mention from the Trustnet list sorted by yield:

9.9% Marlborough High Yield Fixed Interest (pays quarterly interest)
8.0% Newton Global High Yield Bond (pays monthly interest)
7.3% Newton Higher Income (pays quarterly distribution)
6.6% Invesco Perpetual Monthly Income Plus (pays monthly interest)
5.8% Invesco Perpetual Distribution (pays monthly interest)
3.9% Invesco Perpetual High Income (pays twice a year distribution)

That's not an adequate range, just some funds from some of the income producing types. Adding commercial property would also be good, as well as a more general range of funds covering the world. The ones that pay interest should be given priority for placement in the ISA because interest in an ISA is tax free; start with the ones that pay out most interest.

I deliberately avoid gilt and high quality corporate bond funds at the moment because there's reason to believe that they may be in a price bubble and could be bought more cheaply in a couple of years. Normally they would be key parts of the mixture and even now having a little in them is reasonable.

You need to pick a mixture where the combined drop if they all fell at the same time is within your tolerance. I'd like to write that diversification makes that unlikely but sometimes it doesn't work out that way. Still worth doing for the times when it does work.

Ark_Welder

Don't forget about inflation. You might manage on £2000 p/m today, but it is very unlikely to be enough in 14 years' time.

I try to keep the yield on my assets (across all types) between 3.5% and 4.5%, and look to spend less than the level of income generated (which is a mix of distributions received and proceeds from sales), the excess is then reinvested or left to accumulate. Capital really needs to be allowed to grow over the years (with the ineitable ups and downs) to be able to increase the available income in subsequent years, which should help to either keep up with or surpass my future inflation-affected expenditure requirements.

I would be wary of taking out more than 5% income each year because this might start to impede on you assets' abilities to grow.

Loughton_Monkey

As a rule of thumb, having retired early myself, a 'very comfortable' position at age 56 was to have total assets of 40X annual spending requirement. If you deduct that part of assets that will not be spent [house equity], we are talking of nearer 30X spending. This was calculated on the basis of NIL spouse salary, and the assets include some minor pensions in her own name.

Also, that figure included the 'actuarial' value of Final Salary pension schemes. [Basically the transfer value].

On one thread, I recall others promulgating the idea that 20X spending was 'comfortable', with which I don't argue too much, but being cautious, I would not have retired at less than 30 [40 with house equity]. My self-stipulation was to retire when I thought I could afford to continue the same spending as when in work, inflation proofed, for life. So far (almost 6 years) I have recently just gone above 6 figures of 'contingency' - i.e. a combination of higher earnings/lower spending compared to the 'plan'.

So I don't know if you can make 'adjustments' to this to fit your (different) circumstances. On the one hand, you have another 10 years more than me to support yourself. Against that, however, you do have a healthy spouse income.

Vortigern

philng wrote: »

Expected redundancy would be around £75k.

Redundancy money in excess of £30k is taxable. You may be able to route some of the redundancy money straight from employer to pension to avoid taxation. May depend on whether your employer offers added years and/or AVCs.

Loughton_Monkey

Vortigern wrote: »

Redundancy money in excess of £30k is taxable. You may be able to route some of the redundancy money straight from employer to pension to avoid taxation. May depend on whether your employer offers added years and/or AVCs.

Good point for OP.

If your redundancy were to be in exactly 6 months, then maybe, depending upon your earnings, you could indeed mitigate the tax by putting £45K into pension [although there are limits....]

You need to plan, though, if you last a bit longer, and redundancy comes just after April 2012. In a case like this, you must 'see it coming' and find the money to throw in this tax year, because next tax year (when you get the lump sum) you would not have enough income to qualify for tax relief.