Investor Views: My £1m Retirement Fund Plan

Private investor Sam Newman is hoping her investments will deliver a £50,000 annual income, plus capital to leave to her children

Emma Simon 22 August, 2018 | 2:01PM

Sam Newman is aiming to amass a £1.25m retirement fund and is currently on track to reach this amount by the age of 55, depending on future investment returns.

She says: “I am confident that I will achieve this by this age. But I don’t expect to stop working at this point so if I keep saving I should comfortably exceed this target.”

Private investor Sam Newman

Newman, who lives in Didcot, Oxfordshire, says that a fund of this size should provide an income of around £50,000 a year, assuming she withdraws around 4% a year. “This should hopefully leave the capital largely untouched. This could either fund a retirement home of my choice should I need this later on, or I could leave it to my kids.”

While this may sound like a sizeable sum, Newman has only started saving seriously over the past 10 years. She explains: “I have saved into a pension ever since I started work at the age of 22. But for many years this wasn’t worth much, as it was 10% of a relatively small salary.

“But over the past 10 years I have saved more as my salary has increased, and I have used bonuses as well to add to my pot.” She has further boosted this fund with money received from a couple of inheritances.

Newman, who works in the insurance industry, has also invested in buy-to-let properties. “I invested in buy-to-let about 15 years ago, using some money I received from a redundancy. I bought two new-build two-bed homes on a good estate in Hull for around £75,000 each.

“My thinking was that they would break even each year in terms of income and I’d make my money from the increase in capital value.

“Over that period of time though I netted around £2,000 a year in income and the portfolio increased from £150,000 to £200,000.”

However, over the past five years these properties have not increased further in value. At the same time the income she receives has reduced, due to tax changes. Newman has subsequently sold both properties. “I decided the stress and hassle factor simply wasn’t worth it, given the workload involved. I don’t regret this decision.”

Pensions, SIPPs and ISAs

Newman invests in a pension through her current employer. She also has a small final salary pension from a previous employer, which is due to pay around £6,500 a year from the age of 60.

“I also have two SIPPs. One is with YouInvest [run by AJ Bell] and the other is with Nutmeg. I use the YouInvest account to essentially store shares I have received from my employer.”

Newman also has an ISA with YouInvest, which also has more shares from her employer.

She says that these shares have done “extremely well”. She says: “They just seem to increase in value. I invest around £500 a month in a share save scheme which pays out every three years.” Typically the value of these shares has doubled over this period.

As Newman has a significant amount in just one shareholding, she has tried to diversify her portfolio in recent years.

“I used to buy individual shares or funds but over a number of years I’ve realised I haven’t made particularly good decisions. I didn’t really have a clue what I was buying. Some did amazingly well, others performed terribly.”

Newman says these included an ETF which tracked the gold price. She says: “I bought this at completely the wrong time when prices just went backwards.”

She adds that an ETF that tracked the performance of the BRIC countries – Brazil, Russia, India and China – was similarly disappointing.

Ready-Made Portfolios

A tracker fund that followed the FTSE 250 was more successful, which made Newman realise she is “simply not a stock picker”.

As a result she says she invested in a ready-made portfolio of ETFs through the SIPP and ISA she holds with Nutmeg. She says: “Any spare cash I have goes into the investment account that is fully managed with Nutmeg. What I like about their service is that I can split my money into several ‘pots’ with different targets and risk levels.”

Newman invests a substantial amount each month and will also salt away a portion of her annual bonus each year.

She adds: “I am not particularly materialistic. I could afford a bigger house or nicer car, but I get more pleasure out of saving for the future, knowing that when I am not working I will still be able to afford the things I enjoy doing now, whether it’s holidays, eating out, or going to the theatre regularly.”

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk