‘We’re in our 30s – can we retire in 20 years with £1m?’

A couple earn a combined salary of £110,000 but do not have much time to build up pension savings. By James Fitzgerald

Married couple Ade and Rachel Rogers-Wright, 37 and 32, have managed to build up a pot of savings and investments – but a rethink in strategy is needed if they want to retire early.

The couple rent in Woolwich, south-east London. Mr Rogers-Wright is a train driver and his wife an executive assistant. They earn a combined pre-tax salary of £110,000.

They hope to amass a combined pension pot of around £1m by the time they plan to retire at age 55 – roughly 20 years from now.

Mr Rogers-Wright has a final salary pension that should pay him about £30,000 a year at 65. His wife has a private pension worth £11,000 with investment house Vanguard and a £ 15,000 pot with another pensions company, as well as a workplace pension worth £ 6,000 invested with Legal & General into which she and her employer contribute £ 500 a month. She also has £20,000 in shares given to her by a previous employer.

The couple have £4,000 invested in Premium Bonds, some cryptocurrency and £15,000 in two stocks and share Isas, which are invested in a Vanguard ETF fund and a global smaller companies fund.

With their combined salary, pensions and investments, this is a positive start to their retirement journey. What complicates their ambition is a potential house purchase in a few years: the couple would like to buy a £350,000 property in the area around Gravesend in Kent.

James Marston Financial planner, Quilter

Mr Rogers-Wright has 18 years until his planned retirement at age 55 and his wife has 23 years. This does not allow a long time frame for investment growth. Their strategy should be to spend little and to save as much as

Ade RogersWright, a train driver, with his wife, Rachel, an executive assistant, want to buy a house and retire early possible into their workplace pensions and Isas. Their total investable assets today are £ 80,000. If they make monthly contributions of £2,200 and that money grows at 6pc a year for 18 years, they will end up with a £1.1m pot.

Mr Rogers-Wright’s income after tax is £46,430 and his wife’s £34,996.

Their pension contributions will cost £26,400 a year, giving them £55,026 a year to live on, which is achievable.

Although they have a combined income of £ 110,000, they have few assets and don’t own their home.

If they buy a home in five years, Mr Rogers-Wright will be 42. Assuming they take out a 25-year mortgage and he does retires at 55, he will continue to pay the mortgage for another 12 years, so he will be meeting monthly living costs including mortgage repayments while depending 100pc on his retirement savings.

But his pension won’t begin payment until age 65, leaving 10 years to selffund retirement.

In addition, if he retires at 55 and stops paying into the pension it may end up not being worth £30,000 a year. He could increase his contributions to £14,460 a year, which would mean his income was below the higher-rate tax threshold of £50,000 and he would not pay 40pc income tax.

To save for a home deposit the couple could use Lifetime Isas. The Government will give them a 25pc bonus of up to £1,000 a year as long as they use the funds to buy their first house.

If they both save £4,000 into the Lisa, the Government will top this up to £5,000.

Their current investment strategy is broadly suitable – they are invested in global equity funds which means investing in stocks and shares from all over the world.

This is good for several reasons. Firstly, this should give them the best chance of considerable growth over the

‘Their strategy should be to spend little and to save as much as possible’

next 18 years. For example, the US market for example has averaged 11pc growth per year over the past 72 years.

Secondly, global equity funds generally have cheap annual management fees and finally they are well diversified because they invest in companies all over the world.

Their other investments such as cryptocurrency and the previous employer shares carry more risk.

Taking concentrated bets on an investment you may not necessarily understand may not be the wisest decision and could open you open to more risk than you are comfortable with.

They should find a tax-efficient home for the £20,000 of shares. This could be a stocks and shares Isa or a pension.

The Premium Bonds are fine as an emergency savings vehicle but there are fixed-rate savings accounts that pay more than 6pc a year.

Emma Deuchars Investment manager, Bestinvest

While the couple’s aims centre on retirement, their emergency fund of £4,000 in Premium Bonds seems low – we recommend a cash fund for unexpected expenses of six to 12 months’ expenditure.

The sooner the couple add money to their retirement funds, within their taxfree Isa allowances, the longer they will have to benefit from compound interest from their investments. As the gap between their retirement goal and their existing funds is large, it is especially important that they benefit from longterm compound interest to the full.

I suggest they increase diversification within their funds. While the largest holdings in their existing portfolio are in the stock market, I would consider reducing their weightings as both are heavily skewed towards large US stocks and therefore will behave similarly. Instead, they could add geographically specific funds to ensure a spread of investments, for example some European, UK, Japanese or Asia-Pacific stock market funds.

Having “actively managed” funds within a portfolio alongside the existing “passive” holdings would give the potential for long-term gains ahead of the market and some protection against stock market falls.

Their retirement time-horizon may be around 20 years, but any funds invested to provide the house deposit in five to six years should be made for the medium- term. Bond holdings should be present to provide a lower-risk element and I would use tracker funds that hold government bonds. These bonds are not subject to the risks that corporate bonds face in the uncertain economic climate.