Savings go to work as a career ends early

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LAST year Roger Hume, 58, and his wife Jean both took early retirement, writes Dido Sandler. With 31 years' service in a large manufacturing company, Mr Hume retired on a pension worth half his final salary, and is also receiving pounds 60 a month from a top-up pension plan called a free- standing AVC (additional voluntary contributions). Mrs Hume has no pension. Her husband is now looking at ways to raise the couple's income to nearer the level reached when he was working.

Mr Hume has a tax-free lump sum of 25 per cent of his pension pot, plus an additional lump sum of severance pay.

Mr and Mrs Hume took out Tessas five years ago. In the next few weeks they will receive the final maturity values on his Bradford and Bingley Tessa and her Britannia one. The Bradford & Bingley account is among the better performers of Tessas now maturing. The Humes like the safety of this tax-free account, and will be reinvesting the pounds 9,000 capital in a Tessa 2. But they are not sure what to do with the accumulated interest.

Mr Hume owns some shares in his old company, and has put them into a self-select PEP. This allows him tax-free income and capital gains.

The Humes have accumulated five PEPs investing in unit trusts since 1988. Their portfolio contains high-income funds from Bradford & Bingley, Prudential, Perpetual and Britannia, but they are reinvesting the income for future growth. They may now consider taking some income to help maintain theirlifestyle. ''We like the flexibility of being able to take an income as and when you need it,'' said Mr Hume.

The couple also have a five-year tax-free savings policy with Homeowners Friendly Society, plus a tax-free SAYE savings account (no longer available to new savers) with a building society.