Money Makeover ‘I’m 24 and earn £40,000. Can I retire at 45?’

Our reader has a generous pension but will it cover the cost of four holidays a year? Marianna Hunt seeks expert advice

Andrew Barclay, 24 and from Glasgow, would like to stop working at 45 and enjoy a retirement that involves four week-long holidays a year.

Mr Barclay earns £40,000 a year working as an air traffic controller for the Royal Air Force.

“From the age of 42 I can claim a lump sum of £ 90,000 plus a yearly income of £ 18,500, which will rise with inflation, via my military pension,” he said.

Mr Barclay owns a rental property but plans to sell it and buy a new buyto-let costing £60,000, which will be mortgage- free. This will leave him with £20,000. The income from the property should be around £ 600 a month, a yield of 12pc, which is achievable by converting properties so that they have more bedrooms.

Mr Barclay also invests and has shares in the oil firms BP, Premier Oil and Royal Dutch Shell, the cruise line Carnival and the airline Tui, plus some silver. The portfolio is worth £5,000, but some astute trades, buying when markets crashed and taking profits when they rose, made him a tidy return of 19pc in 2020.

His monthly spending pending on bills, food and military y rental accommodation is £800 a month, leaving him with spare cash to fund his ambitious retirement plan.

He said: “I’d like e to buy my own home by the time I am 30, although I’ll rent it out for a while first. I’d also like to have bought t a second investment property by then. hen.

“My aim is to overpay verpay and be mortgage-free and either retired or semi-retired tired by 45 so I can go skiing ng regularly and visit friends nds in America and Dubai.” i.”

Arlene Ewing

A planner at Brewin Dolphin, the e wealth manager: Mr Barclay expects cts an annual income of £7,200 from his investment tment property, a yield of 12pc. However, he needs eds to factor in taxes, running nning costs, management nt fees and void periods.

Taking these things into account, conserva

Andrew Barclay, below, would like to spend some of his retirement skiing tively I think he should assume a yield closer to 7pc. He should remember there is no guarantee that house prices will increase. Property cannot be sold quickly if you need the money for a family emergency, for example.

His investments are worth reconsidering. As he has a long time before he will need the cash, and is clearly happy taking risks, Mr Barclay could expect to make the same sort of returns but a little more safely if he diversifies his portfolio.

It is skewed heavily towards oil, travel and leisure stocks. Oil companies face difficult times and, as for holiday companies such as Tui and Carnival, it is very difficult to say if and when normality will resume.

I do not think silver is necessary for him. It can be volatile and it could be risky to presume that it will provide long-term gains. He got lucky last year and I would not expect a return close to 19pc again if he doesn’t change his holdings.

Instead, I would suggest he invests in a few funds and investment trusts covering different geographic areas, such as Scottish Mortgage, Fidelity China Special p Situations and Baillie Gifford Japan. B BlackRock Throgmorton is another optio option. It focuses on smaller companies, wh which may offer the potential for better re returns.

If Mr Barcla Barclay wants to diversify by buying commo commodities, I would suggest gold, not silver. I would also introduce good- quality bonds, inclu including both government and corpo corporate bonds. They will act as a protective buffer when there are periods of volatility

in th the market.

Don D Fraser D

Director at Capital Asset Management, the financial planner: Mr Barc l ay ’ s current spending is £ 800 a month, or almost £ 10,000 a year. If living costs increase by 3pc a year, by 45 his annual expenditure will be £ 18,000. Add i in the cost of four holidays a year – at around £7,000 including spendin ing money – and this rises to £ £25,000 a year.

Assuming that Mr Barclay is correct that he can claim a pension income of £ 18,500 from 42, his total income at that age will be £32,500.

This includes £14,000 a year from the buy- to- let he plans to purchase and assumes his rental income rises by 3pc each year.

After tax his income will be £25,740. So it will cover his costs, but leaving only £740 as leeway.

However, he also has his share portfolio. Assuming he achieved growth of 7pc a year on average, it would be worth £21,000 by the time he hit 45.

He could then probably draw down 4pc a year without reducing the overall value of his capital. This would give him an income of about £840 a year.

From the age of 68 Mr Barclay will also start to receive his state pension. The current payment is £175.20 a week for those who have the full amount of National Insurance credits.

Based on current life expectancy, he is likely to live to 86. His income should last, as his military pension is guaranteed. He may have to cut back on holiday spending if unexpected costs come up.

Once Mr Barclay starts to receive £ 600 a month from his new rental property, he will have surplus monthly income of about £2,178, as he spends just £800 yet will be earning £2,978 after tax.

The best place to put this money is into an Isa. It is not quite as tax efficient as a pension, but, as he aims to retire early, would give him more flexibility.

He could also consider putting surplus funds towards paying off his mortgage once he buys a home at the age of 30. If he wants to be mortgage-free by 45, accelerated repayments from his income will be needed.

If Mr Barclay still hasn’t paid off his mortgage by then, he could use some of his £90,000 lump sum to do so, then invest the rest.

I would not suggest putting the money towards buying more investment properties, as there will be capital gains tax to pay when he sells them, whereas profits made in an Isa are free of tax.

Technology companies have unquestionably been the winners of the pandemic. Share prices rocketed last year as millions grew accustomed to lockdown life and relied more than ever on their products.

Funds that invest in these companies soared and the Fidelity Global Technology fund was no exception: it has returned 40pc over the past 12 months, ahead of the 36pc from a global index of tech stocks.

Hyun Ho Sohn, who has run the £8.2bn fund since 2013, is now turning his attention to life after the pandemic and the stocks poised to take off when we exit lockdown. He tells Telegraph Money why he thinks not all technology shares are expensive and why one household name should be seen as one of Britain’s tech leaders.

WHO IS THE FUND FOR? The fund is for any investor looking for long-term returns from the technology sector. Technology is used in our daily lives and companies are well positioned to capitalise on that so we want to share in their growth. We invest globally and, for us, technology includes any company that drives tech innovation as well as those that can benefit from tech evolution.

CAN TECH COMPANIES GROW AS MUCH AS THEY DID LAST YEAR? There was a lot of pent- up demand during the pandemic when people were working from home.

A lot of people bought accessories for work and for leisure at home, such as computer mice and headsets. Demand for these things will still be there in the long run, but won’t be quite as high, so growth will slow.

It will be the same for IT spending, where there will be less focus on getting things running in the short term, like when there was a huge need for Zoom or automated signing processes. Instead, companies will have to spend on modernising banking processes and migrating their data to the cloud.

CAN THE TECH GIANTS CONTINUE TO DOMINATE? In general, the large tech companies will continue to grow nicely. Who can really challenge them? Their positions are so strong. We use more tech every day – consumers and corporations rely on it for everything from disaster recovery to contingency planning.

ARE THERE ANY CHEAP TECH STOCKS? Activision Blizzard, the video gaming company, is undervalued. There are very few companies that can produce the kind of high- quality games that it does. The company benefited from a lockdown economy, but it goes beyond that. More people are starting to play games in general, so that will lead to a profitable business in the long term.

One interesting British stock is RollsRoyce. While many would not view it as a tech company, it collects and analyses a huge amount of data and uses it to develop new products. It’s going through big challenges because of Covid but the company has a lot of advantages and shares a duopoly over the market with General Electric.

We bought it last May because the company can recover quickly when we go back to normality and people start flying. We think the stock still looks cheap.

WHAT HAVE BEEN YOUR BEST INVESTMENTS? LinkedIn was a very memorable investment for me. I liked the concept and it had good management. It went through a lot of volatility when it was in the early stages of growth.

In January 2016 its share price more than halved to $114 after it missed just one quarter of earnings expectations and I bought more stock. Shortly after that it was bought by Microsoft for close to $200 a share. There are other investments that made more money, but this one meant a lot. For example, I’ve owned Google since 2013 and bought shares below $400. The stock is now worth more than $2,000.

AND YOUR WORST? It was a complete failure and you probably haven’t heard of the company. It was called Violin Memory, a small new company that claimed to have innovative data storage technology.

It turned out that the product could be commoditised very quickly and competitors were able to quickly eat into the company’s market. Then key management left and Violin Memory went bankrupt. It was a small investment for the fund, but it was a painful experience for me.

HOW ARE YOU PAID? All of my employee pension goes straight into the fund every month. I’m paid a salary and a bonus, which is based on the fund’s performance.

WHAT WOULD YOU HAVE BEEN IF NOT A MONEY MANAGER? To be honest, being a fund manager was my dream job.

QIn August 2019, I was involved in a car accident that wasn’t my fault. There was some damage to my car, and the other driver’s insurer, Hastings, agreed it was liable.

After the accident, I was told by a doctor that, because of the collision, I was now deaf in my right ear. I have had countless scans and appointments for my ears to confirm the hearing loss.

Despite being in my early 20s, I now require a hearing aid. Privately, these cost thousands of pounds, and I can expect to wear them for the rest of my life.

I approached a “no- win, no- fee” solicitor, who agreed to take on my personal injury case.

He formulated a case for me and put in a claim for a total of £59,000. This would cover privately fitted hearing aids for life, plus things like a tinnitus masking device so I can sleep.

The solicitor first submitted medical evidence to Hastings in November 2019, but it asked to see more.

Since then, everything Hastings has asked for has been submitted, but it’s been months and I’ve got nothing back from the insurer.

I’ve just graduated from university and I’m really desperate for this money. My solicitor and I have been trying to contact Hastings, but it’s been very unhelpful. I really hope you can give it a kick in the right direction. – Anon A It must have been hard for you to learn that you had permanently lost your hearing in one ear, and at such a young age. Being able to hear is something most of us take for granted every day.

So you were there, skint and fresh out of university, yet having to shell out for expensive hearing aids while looking for a graduate job. I really felt for you, and wanted to get this claim moving to secure this payout, allowing you to move on with your life.

I asked you to send me the medical evidence compiled by your solicitor, which you did promptly. In the document, a consultant surgeon said there was nothing untoward in your past medical notes that would have any bearing on the claim. He said that in his opinion, and on balance of probabilities, this car accident, in which your head was jolted from front to back and hit the window panel with “full force”, was the “sole causation of your audio vestibular injuries”.

So why wasn’t Hastings playing ball? I asked it to investigate why the claim was taking so long, as you hadn’t been able to establish a reason.

Hastings came back and told me your solicitor had refused to grant it direct access to your medical records, which it needed to progress the claim.

I asked Hastings why it needed this, and it said it was to prevent information being redacted or removed by a third party. I thought this seemed fair enough, so I asked your solicitor to supply you with the necessary form to sign. You said you were more than happy to authorise direct access to your medical records, as you had nothing to hide.

However, your solicitor had other ideas. He was reluctant for you to sign the form and asked you to stop talking to me. Naturally, I found this concerning, but you said you were desperate to sign the form. I told you that you had a right to sign it in order to progress the claim, as it was going nowhere otherwise. If you had nothing to hide, then you had nothing to lose by signing it.

So you put pen to paper, and Hastings was granted permission to freely browse your full medical file.

More months passed before a decision was made. Further evidence was being gathered about your employment history, various benefits you had claimed, and more. You were growing more and more agitated and started to worry I had given up on you.

I told you I was committed to getting to the bottom of this case, and that

‘Despite being in my early 20s, I now require a hearing aid for the rest of my life’

I would see it through to the end.

Finally, last week, your case concluded in a way I had dearly hoped it would not. Hastings was happy to pay £709 for the damage to your car, but rejected the £59,000 personal injury claim in its entirety. In fact, it invited you to withdraw it. First off, it had reviewed dashcam footage of the collision, which showed the impact was “minor”. This was quite different to the impression I had been left with by your solicitor’s medical report.

And second, having reviewed your medical history in full, it found doctors who assessed you after the crash found no sign of injury whatsoever. You dispute this, saying doctors found dried blood in your ear. However, I’m afraid it would be wrong to assume a bit of old blood was confirmation of a life-changing injury. There could have been many reasons for its presence, and you have no proof of when it was fresh.

And in a final devastating blow to your case, Hastings also poured cold water on your solicitor’s medical experts’ assertion about your medical history containing nothing that could affect the claim. Quite the contrary, it found you visited your GP twice in June 2019, some two months before the car crash, complaining of pains in your ear.

When I asked you about this, you said you had no recollection of these visits, but accepted they may have happened if they were on your record. You have always insisted you have nothing to hide regarding this case, and have pushed for full transparency at every stage. Yet it seems there is more to it than meets the eye.

It hurts to think you may have appealed to my better nature, thinking I could push through this claim for you even though there is little direct evidence linking your hearing loss to the car crash. But as regular readers of this column will know, the truth has a way of slipping out in the end.

It may be that, desperate for a reason for the onset of your deafness, it was easier for you to think this crash was the cause, rather than have no explanation. Especially once you were being egged on by lawyers and their medical teams. But unfortunately, other gaps have appeared in your story.

After I told you I had discovered that you were involved in another car accident earlier in 2019, you withdrew consent for Hastings to share any further information with me. You say this other accident was not your fault, but I have seen no proof of this.

There are also still significant gaps in the employment history submitted to Hastings, which raises questions.

You first turned to me to increase the pressure on these insurers in the hope of winning a £59,000 personal injury payout, and you enlisted an aggressive lawyer who was acting in anticipation of a sizeable cut.

But the last time we spoke, you apologised for wasting my time, admitting you felt you had made a mistake by lodging the claim in the first place. You said you felt swept along by the lawyers and medical experts, which I said I could understand.

But at the same time, it was you who instructed the lawyers, and although I think you have been naive, it is no excuse, and it is only right that you take personal responsibility for your actions.

You are now going to the NHS for treatment for your ears, which is what you should have done in the first place.

Your case provides a lesson in why insurers can sometimes appear slow to process claims – because they have to go through the details with a fine-tooth comb.

I don’t know what truly lies behind your claim, but sadly there are far too many chancers filing “cash for crash” cases, which simply aren’t genuine.

They waste time and drive up costs for everyone else, which is unacceptable. The drivers and solicitors facilitating such ruses should be nothing but ashamed.