I’m not taking my retirement for granted. It’s why I invest my money in UK shares, funds, and trusts at every opportunity.
We all dream of putting our feet up after a lifetime of work. Unfortunately this is becoming harder to do as the cost of living and social care rise.
Indeed, fresh research shows that the size of the pension pot needed for basic retirement has soared 60% over the last three years.
Here’s what I’m doing to safeguard my retirement plans.
Up 60%!
Today, the average pension pot needed to meet basic needs in retirement stands at nearly £110,000.
According to the Living Wage Foundation, the amount required for a threadbare standard of living has jumped from £68,300 in 2020/21, to £107,800 in 2023/24.
The need for larger pension pots means many Brits are pessimistic about when they’ll be able to finally hang up their work apron.
Living Wage Foundation’s survey showed that 53% of pension savers “felt they would never be able to retire“. Furthermore, 63% of those felt they would have to work several years beyond retirement age.
No-one knows what the future holds. But with living and care costs on the increase, I think it’s important to save and invest regularly, and to try and come up with a workable investment plan.
Here’s what I’m doing now. I’m confident it’ll allow me to retire at a reasonable age and in comfort.
Two top tips
The first thing I did on my investing journey was open a tax-efficient Individual Savings Account (ISA). Since then, I’ve also opened a Self-Invested Personal Pension (SIPP).
These products have strict rules annual contributions and withdrawal timings. However, over the long term, they can save me a fortune in capital gains tax and dividend tax, thus boosting my pension pot.
The next thing I ensured was to invest in a range of assets to balance risk and reward. This is why I hold a Cash ISA as well as a Stocks and Shares ISA, Lifetime ISA, and SIPP for share, fund, and trust investing.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
A £350k pension pot
I also choose to invest most of my money in equities. Past performance is not always a reliable guide to the future. Still, share investing tends to provide far higher returns than, say, holding money in cash.
As part of this strategy, I hold shares in 10-15 companies to help me spread risk. I also have holdings in several exchange-traded funds (ETFs) including the Xtrackers MSCI World Momentum UCITS ETF (LSE:XDEM).
This fund holds shares in several UK blue-chip shares including AstraZeneca, Unilever, and British American Tobacco. But as its name suggests, it also has considerable global exposure. This gives me excellent diversification, allowing me to manage risk and capture a multitude of growth opportunities.
Since 2014, this Xtrackers fund has provided an average annual return of 11.7%. If this continues, a monthly investment of just £200 for 25 years would give me a pension pot of £356,351.
That’s more than three times the £110,000 the Living Wage Foundation says I’ll need for a basic retirement.
Its focus on US shares could see it underperform if the stateside economy begins to struggle. Yet on balance, I still think it’ll prove a great investment for me over the long term.
