Pension help

yariso

Hello, i am after some help. I'm 38 and currently work for the NHS and have a pension pot of approximately £180,000. I have been offered a job in the private sector with a wage of £90k per year and a 4% pension (i put 4% in, they put 4% in).

I want to retire at 60 or earlier. How much money do i need to put aside each month and what do i invest in? My mortgage is £1200 per month and don't have any other credit.

Thank you

jamesd

With no idea about what your income target is it's impossible for us to give a meaningful answer, we'd have to just invent a number. Try the Invidion pension calculator. Set inflation rate to 3%, increase to 3% and set the expected annuity/drawdown rate to 4%.

It's also important to planning to know whether the £180,000 is on top of the NHS pension or is its transfer value. NHS pension expected payment and normal retirement age are needed because part of the task is to replace that income until you can take it normally. Same for state pension, you initially need to replace that. These replacements mean that you will need to draw more money in the early years and less once you reach state pension age.

jamesd

Given our income you should also learn about VCTs. This is because they pay 30% of the amount purchased as tax relief, capped at income tax actually paid, with an annual limit of £250,000 of buying a year. They are available in a wide range of risk levels from highly speculative to asset-backed investing in hotels and care homes (for older ones only, new ones can't use those two investments). The 30% has to be repaid if sold within five years. Sell after that and you keep it. This means in part that if you can afford to defer all or some of your income for five or six years you can make a nice gain on the deal. The low to medium risk generalist VCTs tend to pay around 5-6% tax free interest a year, equivalent to 8-10% after allowing for the effect of the initial 30% tax relief on the purchase price.