Investment advice needed

amcluesent

Some background on me, single man 42, no dependents, income £62K

Home owner, approx. value £120k, no mortgage
Cash savings £50K
Cash ISA £15K
Premium Bonds £30K
Shares £40K (20K in Sainsbury/M&S, £20K in odds and ends)

Net worth £257,490.35 (just checked!)

Would like to retire at 50(!)

dunstonh

Wanting to retire at 50 rules out pensions as you wont be able to commence any pension you have until age 55 at the earliest.

Premium bonds arent going to go much for you.

You probably need around £500,000 in savings/investments at age 50 to make your goal reasonable.

EdInvestor

Given you havre already sorted the property and have a large cash pile, going forward you should expand your shareholdings.

Have a look at the High Yield Portfolio to build on what you already have.

http://www.fool.co.uk/specials/2006/specials060208.htm

On the tax front you should max out your Stocks and Shares ISA (7k per year) for the shares thus I would suggest that you divert new cash ISA contributions into tax free NS&I inflation-linked certificates, an excellent return especially for a high rate taxpayer .

You will pay 25% tax on your dividends as an HRT on shares held outside the maxi ISA, but that's better than 40% on cash, bonds and property. CGT allowance of 9k a year on realised profits is available if needed, but at this point you should probably just buy and hold long term, allowing your dividends to accumulate and reinvesting annually.Later, when you retire (and become a basic rate or non taxpayer) you simply take these divis as your tax free income, rather than reinvesting them.

What broker are you using for the shares?

amcluesent

>What broker are you using for the shares<

Online using Barclays no-advice service.

NB Forgot to add that am currently in a final salary pension, and have two previous final salary schemes which I left to accumulate. Was thinking about a xfer out of these two to consolidate in some way?

Oh yes, the £30k in the premium bonds was put in a April for the 5x June jackpot and was going to get knocked back to a nominal £1000.

dunstonh

NB Forgot to add that am currently in a final salary pension, and have two previous final salary schemes which I left to accumulate. Was thinking about a xfer out of these two to consolidate in some way?

Transfer into what? Chances are a transfer will lose you money but the pensions are not an issue as they cant be used.

gsv415

40K to invest. No mortgage / debt. No tax payer want safe enviroment. longer term considered

gsv415

jamesd

amcluesent, stick 130,000 in investments and have them grow at 7% over inflation and you'd have 227,000 at age 50. Using 5% for income you'd end up with 11350 a year, 945 a month.

Wait until you're 55 and the value increases to 322,000 and the income to 16100 a year, 1341 a month.

Both of those assume that you're not making any additional investments besides the initial lump sum. Add 500 a month and the age 50 amount rises to 1210 a month, 55 to
1875 per month.

If you're willing to spend the capital you can achieve more than that. I assumed that you want to preserve it.

You're not likely to achieve 7% over inflation with your current asset allocation. Much more investment in equities instead of cash is required.

Chrismaths

Pensions can be used, but only once you get to 55. So assuming if when vest your pensions at 55 you have enough to live on (BIG IF), you only need to support yourself for 5 years till that date. Work out how much that is you need, how much you want to have left over, add them together then save that much.

If your existing pensions aren't enough to support your lifestyle from age 55, then for each pound of income you want in retirement (in real terms) you'll need £29.23 of capital. So if you need an extra £10,000pa in retirement, work out how to save £292,200 by age 55 in today's money. Given RPI at about 4.5%, make that £520,000 (nominally) by age 55. Add that to the money you need to support yourself from age 50 to age 55.