£270K to £450K in 4 years?

tony4147

What do I need to do in the next 4 years to achieve a pot of £450K?...………….originally I wanted £500K but I think is now beyond me.


Current pot value is £270K and I contribute £21K / year, there no employer contributions. Pension is DC, SIPP.


My current plan is at 60 I will take 25% TFLS, then drawdown at 5-6% until 67, then cut the drawdown to 4%, have full SP entitlement.

Spreadsheetman

err...contribute £40k per year to £430k and hope market gains take the balance to £450k? (based on the information provided)

NoMore

You need to find another 100k from somewhere, there's no secret formula people can give.


Its too short a time frame to rely on investment gains and compounding.


If we could guarantee returns you require on your contributions in that time frame we would all be doing it.

ColdIron

If you have sufficient annual earnings use your full annual allowance of £40,000 for 4 years and carry forward £20,000 of unused allowance

steampowered

4 years of contributing £21k a year to a £270k pot gets you to about £350k

It is most unlikely that investment gains would get you from £350k to £450k over a 4 year period

If you require a £450k pension pot, the only things you can do are:

1) Vastly increase contributions
2) Delay your retirement
3) Accept lower income in retirement

232607

With the money you’re putting in you’d need returns of just under 7% to achieve your aim.
Possible but a bit of a stretch.
You’d have to be heavily in to equities to have any chance & accept the possible down side.
Note - this doesn’t consider inflation, IE this will give you £450K in 4 years.

tony4147

Well I can up my contributions to £2k / month, and if I have to work until 62 ish then I will

bowlhead99

tony4147 wrote: »

Well I can up my contributions to £2k / month, and if I have to work until 62 ish then I will

Is the £2k gross or net of tax?

If from your net pay and the pension provider is allowed to gross it up by basic rate relief then there is actually £2500/month or £30k/ year going into your pot.

Simplified calculations:
If you do that for 4 years (£120k) and that takes you to age 60, and then under your revised plan you keep going for another two years to get to age 62 (another £60k), you've added £180k to your pot. That money will have been dripping in over 6 years so will on average have been invested about 3 years (the first £2500 will be there for full 6 years and the last £2500 just one month).

Three years growth on £180k at say 2% a year above inflation is about £191k in today's money. And six years growth on the existing £270k at 2% a year above inflation is £304k in today's money. Together that's £495k in today's money, which is roughly in line with your original target.

However, if the answer is to be properly in today's money you would need to ensure the monthly contributions were going up in line with inflation rather than being static at £2000 net. Hopefully not an issue if you can get a pay rise in line with inflation each year and your living costs aren't going up more than that.

You mention there is no employer contribution. Does that imply you're self employed, in which case your contributions were out of your business turnover rather than being out of net pay, so there's no gross up to £2500 and you only have £2000 going in per month? If so, the challenge is bigger.

dunstonh

You wouldnt want to bet on it being achievable with returns considering the point we are at in the cycle. Indeed, you may well be looking at a period that could have zero net returns over the next 4 years

tony4147

bowlhead99 wrote: »

Is the £2k gross or net of tax?

If from your net pay and the pension provider is allowed to gross it up by basic rate relief then there is actually £2500/month or £30k/ year going into your pot.

Simplified calculations:
If you do that for 4 years (£120k) and that takes you to age 60, and then under your revised plan you keep going for another two years to get to age 62 (another £60k), you've added £180k to your pot. That money will have been dripping in over 6 years so will on average have been invested about 3 years (the first £2500 will be there for full 6 years and the last £2500 just one month).

Three years growth on £180k at say 2% a year above inflation is about £191k in today's money. And six years growth on the existing £270k at 2% a year above inflation is £304k in today's money. Together that's £495k in today's money, which is roughly in line with your original target.

However, if the answer is to be properly in today's money you would need to ensure the monthly contributions were going up in line with inflation rather than being static at £2000 net. Hopefully not an issue if you can get a pay rise in line with inflation each year and your living costs aren't going up more than that.

You mention there is no employer contribution. Does that imply you're self employed, in which case your contributions were out of your business turnover rather than being out of net pay, so there's no gross up to £2500 and you only have £2000 going in per month? If so, the challenge is bigger.

The contributions are gross, I work via my own ltd company which may all change next year due to the 'off payrole' rules that are coming in

tony4147

So I've increased contributions to £2K / month and if I have too I'm prepared to work until 62 (6 years from now) surely that would get me in the ballpark of £450-500K if my pot is £270K now.