Close
Mobile menu

As financial advisers, we regularly get asked by clients how to invest wisely for retirement. If you have ever asked, 'what are the top 5 ways to invest for retirement', then you've come to the right place.

Our article will outline our' ways to invest for retirement and recommendations on 'how much you should invest for retirement. So, let us get started.

Firstly, when investing for your future, any amount you can afford to save will benefit you. People get anxious in thinking the small amount they can afford each month is not worth investing, but those small amounts can add up over time and leave you with a pot of money when you retire. Yes, of course, the more money you can afford to invest will help you grow a larger retirement pot but getting into a regular habit of saving will help deliver a better future than not saving.

Best investments for retirement

  • Workplace Pensions

With auto-enrolment, most workers in the UK will have a workplace pension. A workplace pension is a great starting point for investing for your retirement. Although you may have to save a percentage of your salary into the pension, this is before tax is taken, so in theory, you get a 25% boost from the government, plus your employer is investing potentially 3% a year, so you’re getting a pay rise too. It’s a win-win situation.

If you leave your employer, don’t forget about your old workplace pension. The Association of British Insurers estimates that over £19 billion is sitting in lost pensions. Keeping track and potentially moving your old workplace pensions to a private pension will ensure you don’t lose your money.

  • Personal Pension

Alongside your workplace pension, starting a personal pension is a great way to invest for retirement. Suppose you can afford to make further contributions into a private pension, alongside your workplace pension. In that case, it will help you to save a larger retirement pot, meaning potentially a more comfortable retirement.

A recent survey by Which! suggests that a person retiring at 65 with a 20-year retirement life expectancy could need a fund of around £160,000 if you wish to make money by Pension Drawdown, or £265,000 in your looking for an Annuity. The estimated value is based on delivering £26,000 per year income for a comfortable but not luxurious retirement. You may also receive an income top-up from a state pension, providing you have paid enough National Insurance contributions.

As there are many pension providers and funds, speaking with an adviser before setting up your pension or moving your old workplace pensions into a new fund could be beneficial. An independent adviser will assess your needs and wants for the pension and recommend the best fund and provider for you.

  • ISA

An ISA or Individual Savings Account, to give them their official name, are tax-efficient savings products that can provide a great way of investing for your retirement. An ISA gives you more flexibility than a personal pension should you need to access your money for emergencies. They come in two standard products, a Cash ISA generally sold by High Street banks like Santander, Barclays etc. and building societies, or Stocks and Shares ISAs.

Cash ISAs are seen as a secure and tax-efficient way of saving for your future. Although a secure product, they do not deliver a high return on your investment. For example, A Cash ISA from HSBC could provide an interest rate of 0.05% tax-free. The maximum ISA annual investment of £20,000 would only deliver £10 in interest.

Stocks and Shares ISAs come with more financial risk than a Cash ISA, but they can deliver a higher return for your money. There are many Stocks and Shares ISA providers and funds, so picking the right one for you can be challenging. Speaking with a financial advisor before investing your hard-earned money can help you avoid making a costly mistake.

Currently, the maximum you can invest in an ISA is £20,000 per financial year. You can hold more than one ISA, but you can only invest in one product annually.

Capital at risk, as with any investment, the value of your funds can go down as well as up.

  • Workplace Savings Schemes

As with a workplace pension scheme, some employers also offer a Workplace Savings Scheme (also called Payroll Savings Scheme), where a direct payment from your salary will be invested into a savings scheme. A workplace savings scheme is a great way to invest for retirement, as it runs with a similar outlook as a workplace pension, a ‘set and forget’ nature.

There are three main types of Workplace Savings Schemes.

  • Standalone: automated payments are made directly from your pay into a savings account.
  • Repay and save: automated payments are made directly from your pay into a savings account in addition to paying off a loan you may have received from your employer.
  • Linked to a workplace pension: automated payments are made directly from your pay into a savings account, plus automated contributions to your workplace pension. When the savings cap set by you is reached on a sidecar savings account, i.e., £10,000, any extra flows into your workplace pension, accessible at retirement.

Speak with your employer to see if they offer a workplace pension scheme.

  • Venture Capital Trusts

There are many reasons why Venture Capital Trusts (VCTs) are good ways to invest for retirement.

VCTs offer high growth potential as they invest in smaller, VCT-qualifying companies not listed on the main London Stock Exchange. These companies can grow much faster than larger, more established businesses but come with more financial risk. Investing in small, VCT-qualifying companies means Venture Capital Trusts are high-risk investments, and you may not get back the total amount you invest.

Venture Capital Trusts offer tax incentives for up to £200,000 investment a year. As with any investment, do not simply invest for the tax efficiencies. Tax benefits include: –

  • Income tax relief – You can claim up to 30% upfront income tax relief on the amount you invest, provided you keep your VCT shares for at least five years.
  • Tax-free capital gains – If you decide to sell your Venture Capital Trust shares and you make a profit, the proceeds won’t be liable for capital gains tax.
  • Tax-free dividends – If your VCT pays dividends, there is no tax to pay, and you won’t need to declare them on your tax return.

As with all investments, Capital at Risk and the value of your assets can go down as well as up. Please speak with a financial adviser before choosing any investment.

How much should you invest for retirement?

While there is no hard and fast rule on how much should you invest for retirement, our team of advisors suggest investing around 20% of your salary. While this may not be achievable for some, any amount of saving will benefit you in the future. It is worth bearing in mind that you could already be saving 8% of your salary with auto-enrolment workplace pensions, plus the tax boost from the government.

The earlier you start investing for your retirement, the lower the regular payments you may need to make. For example: Start saving in your early 30s and investing £100 a month with an annual interest of 3% gross. Over 30 years, the investment could give you over £58,000 when you come to retire. The extra retirement savings could be on top of your pension pot savings.

If you are looking for retirement planning advice, please speak with our team on 0161 413 7051 for a free consultation.

How to get expert financial advice.

If you are looking for the best ways to invest for retirement, speaking with our advisers could be the first step to a brighter future. We pride ourselves on our 5-star Trustpilot reviews. As independent advisers, we have access to a range of pension and investment products to provide you with be-spoked advice that’s best for you, over the phone or even through video calls.

Speak with our team today on 0161 413 7051, or fill out our contact form, and we’ll call you back.

Hilltop Finance Limited is authorised and regulated by the Financial Conduct Authority, no. 787803.