'I only have £350k saved, can I retire at 56?'

‘I only have £350k saved, can I retire at 56?’

After building up an IT business, Paul Marsh, 56, is ready to log off. He wants to spend more time with his wife, Cathy, 55, and his motorbike, cruising around the Lake District, where they live.

The pair are also looking forward to holidaying in France. “We’ve gone there since we were kids,” he said. “Dordogne and Loire are our preferred areas.”

They each have a pension from working in local government, which pay out more if they are taken later in retirement. Mr Marsh estimated that the best value could be obtained by taking his at 60 and his wife’s at 63, when they can take a combined £20,312 a year, plus a lump sum of £46,300, assuming they take the maximum pension and smallest lump sum.

But with a target income of £30,000 a year and the state pension only available from age 67, they will need to dip into their savings to bridge the gap.

“My major concern in all of this is have I got enough to last until my pensions kick in?” he said.

The couple have about £150,000 of investments in Sipps and Isas and £100,000 in Premium Bonds, and are expecting a £100,000 windfall soon. In terms of debts, there is a £32,500 mortgage at 2pc interest but they can overpay 10pc a year without penalty.

Investments include Vanguard’s Global Small-Cap Index fund, ESG Developed World All Cap Equity Index fund and LifeStrategy 80pc Equity fund. They also have large stakes in Scottish Mortgage, EdenTree Responsible & Sustainable UK Equity Opportunities and Baillie Gifford UK Equity Alpha.

Laura McLean, Chartered financial planner at the Private Office

Mr and Mrs Marsh are in a favourable position with a guaranteed pension income that will have some form of inflation protection.

They have each built up maximum state pension entitlement so will receive £18,742 from state pension age. Combined with their final salary pensions, they will easily receive £30,000 a year even if they take their pensions earlier than planned. Before their state pensions start, they can comfortably use their savings to bridge the gap, especially given the £100,000 windfall.

If they use the windfall and Isa for bridging income, they will still be left with £130,000 including their Sipp, even if the investments only return 1pc a year. This could be used to boost income or fund holidays, be passed on as an inheritance or even saved for later life care costs.

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