How much do I need to Retire?

greeneking

Thanks Kittie - we don't use cc's so no temptation there - pleased to hear that you are on track.

greeneking

Thanks - I thought you might advise that there was not enough in shares - I have been quite risk averse in the past but I will certainly be looking to move some of the premium bonds money into this area over the next two or three years within the ISA wrappers- thanks for your tips on HYP and selftrade. I will certainly investigate this area properly. I think I will also take Kittie's advice and put some further into NS&I certs to come out at varying times to maintain a flow.

I had some good news from my works pension administrator when I raised the topic with them - they have indicated that my deferred pension allowances (between when I plan to leave in 12-18 months time and when I can draw pension in 2014) will be increasing each deferred year by RPI so they have calculated roughly that my annual pension would be worth something like £14,500 and lump sum about £44,000 when drawn in 2014.

Makes it even more attractive as a proposition.

Thanks for your help

dunstonh

The HYP is not low risk. It is medium/high. It certainly is a valid strategy and you can also utilise investment funds to the same principle and use non stockmarket high yielding funds as well. This can reduce the amount of risk taken.

greeneking

Thanks Dunstonh - I obviously need to be content that any monies in shares is not open to too much risk - so are funds like Invesco Perpetual Income etc which have good 'track records' as good a place as any? in addition to the ISA's

[Deleted User]

I agree with dunstonh that the hyp is definitely not low risk. The stock market is in a very volotile condition just now and I sold all our stocks on a rebound. I get 4.75% interest on the cash in sippdeal and the average yield on maybe 20 hyp stocks is around 4% with the added risk of the stock value plumetting. We may be about to resume a bear trend or we may only get down to 5500 in the ftse but in my opinion the stock market should not be messed with at the moment and particularly near to retirement

I will resume buying hyp stocks within the sipp when I believe that the market has settled (but I have to say that I am no amateur)

At the same time I would certainly not buy any fund. In my experience the managers cannot change to cash quickly and nor can they get completely out of shares. Bonds are also very unsafe at this moment in time Cash is king

EdInvestor

HYP risk level is similar to Invesco Perpetual Income/Higher income.Equity income funds/HYPs are the lowest-risk way to invest in shares.

It's not very helpful IMHO to categorise asset classes ( eg cash/bonds, property funds, shares, commodities) by risk as there are such large variations within the classes ( eg a very large gap in risk between HYP/equity income funds and small caps funds, or single country funds (eg Russia) which are really commodities funds in disguise. Equally bonds are not as low risk as many people thought, and cash of course carries long term inflation risk and fluctuating income problems.

It can be more useful to look at an overall portfolio.

For instance accourding to the 'regulations'

40% shares and 60% cash/bonds would be low risk
60/40 would be cautious
75/25 would be balanced ( hard to understand I know :rolleyes: )
>80/<20 would be high risk ( aka "adventurous" )


But if you had 60% in cash and 40% in equities but it was all in small oil and mining shares I'd have thought the overall profile would be up somewhere near balanced, because you could actually lose 45% of your money.

Whereas if you had 25% in cash and 75% in equities but of the HYP/ equity income type, then that's somewhat lower risk than a typical balanced profile, more like cautious, because these shares act defensively in a downturn and thus you are unlikely to lose your money.(In the last crash, which was a big one, at its worst the HYP as down only 20%, less than half the decline of the market as a whole, and it rapidly bounced back.)

Of course these investments are primarily aimed at delivering a long term rising dividend income so fluctuations and volatility in the capital value are not so important anyway.I certainly haven't sold any of my HYP shares, indeed there have been some excellent buying opportunities lately with some shares offering the opportunity to lock in high yields for the long term.

greeneking

Thanks to you all for your comments and suggestions - from what you have said it would appear that I can actively pursue this line if I am careful in the planning aspects, stick to a proper financial plan and budget and ensure that I don't overdo the reduction in capital aspect during the gap years between leaving full time work and receiving my various pensions.

I also have to make sure that I have a 'balanced' or reasonably mixed portfolio with regard to cash (in interest bearing accounts) and investments in shares to make sure I get the best return out of my capital - bearing in mind risk.

No -one as yet has suggested that this is a non starter on the basis of my current 'pot' so I'm heartened by that.

Thanks again - but if anyone has any further suggestions or advice I am always willing to learn.