How to invest for your retirement
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How to invest for your retirement

Ensuring you have enough money for your retirement requires good planning, and it pays to start early as well.

Putting away some money each month into a tax-efficient wrapper such as a Self-invested Personal Pension (SIPP) or an ISA is a good way to build up a sizeable pot to use in later life. Once you are retired, you may choose to keep your money invested until you need it, giving it time to hopefully grow further.

A diversified portfolio of different types of investments is a good start to retirement planning. It is possible to put together a portfolio like this yourself if you’re skilled at researching different types of shares and other assets. If you’re less confident in conducting your own research, you could consider multi-asset products, which are designed to ensure you have a portfolio of different shares, bonds and other assets all managed within the same fund.

You could also consider investment trusts, which may provide a diversified portfolio managed by a skilled fund expert and which can be traded on the stock exchange. CT offers a wide range of trusts for investors, so even if you only have a small amount to invest, you can access professionally-run shares across the global market.

You can hold investment trusts, multi-asset funds and many other types of investment in either an ISA or a SIPP, and many people rely on a mix of both to fund retirement.

With all of these options, the value of your investment can rise and fall and you may get back less money than you originally invested.

The power of regular income

One important thing to consider when investing for your retirement is the value of income. Both shares and bonds (government or corporate debt) can pay a regular income to investors, which can further boost your retirement pot if you choose to reinvest the money.

In later life, if you choose investments that produce an income, you can also take this income to live on and leave the original investments untouched to grow further. There are specific types of funds that focus on income-producing assets, while investment trusts also pay regular dividends. For example, the CT Capital and Income Investment Trust has grown its dividends ‘significantly faster than both inflation and dividends from the FTSE All-Share Index’, says Julian Cane, CT fund manager.

How will you take your pension?

New rules surrounding how people take their pensions mean that investing for retirement is more complicated but also more flexible. Retirees no longer have to buy an annuity with their retirement savings. An annuity gives a guaranteed lifetime income but rates can be very low, depending on health and circumstances.

While an annuity is still a choice, the new pension rules allow you to leave money in your pension pot to pass on to dependents at advantageous tax rates, while you are also allowed to take 25pc of your pension pot as a tax-free lump sum.

Once you start to use your pension it is placed into a drawdown fund, and you can choose to take money from it whenever you wish and pass on anything that is left to dependents.

Many people use a mixture of pensions, ISAs and other investments to fund their retirement, and how you use investments will depend on your circumstances, including the tax rates you are paying at the time. Cash taken from a pension – with the exception of the 25pc lump sum – is taxed at your marginal rate, which is the highest tax rate you are paying. Because you have already paid tax on ISA investments you do not pay any more when you take the money out.

A financial adviser will be able to help you decide the best retirement investment strategy for you, as well as how to best structure retirement spending in a tax-efficient and your dependents.

These tax details are subject to change and tax treatment depends upon your individual circumstances.

‘This article written by Rosie Murray-West was first published on the Telegraph here.

This section of the website is directed at persons who are located in the UK. Please read our full terms and conditions and the relevant Key Information Documents (“KID”) before proceeding with any investment product referred to on this website. Nothing on this website is, or is intended to be, advice to buy or sell any investments. If you are at all unsure whether an investment product will meet your individual needs, please seek advice.

29 June 2018
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How to invest for your retirement

Important Information

Important information: Past performance is not a guide to future performance. Your capital is at risk. The value of investments and any income is not guaranteed and can go down as well as up and may be affected by exchange rate fluctuations. This means that an investor may not get back the amount invested. This document is not investment, legal, tax, or accounting advice. Investors should consult with their own professional advisors for advice on any investment, legal, tax, or accounting issues relating to an investment with Columbia Threadneedle Investments. The mention of any specific shares or bonds should not be taken as a recommendation to deal. Columbia Threadneedle Investments does not give any investment advice. If you are in doubt about the suitability of any investment, you should speak to your financial adviser. The analysis included in this document has been produced by Columbia Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice and should not be seen as investment advice. This document includes forward looking statements, including projections of future economic and financial conditions. None of Columbia Threadneedle Investments, its directors, officers or employees make any representation, warranty, guaranty, or other assurance that any of these forward-looking statements will prove to be accurate. Information obtained from external sources is believed to be reliable, but its accuracy or completeness cannot be guaranteed. Issued by Threadneedle Asset Management Limited. Registered in England and Wales, Registered No. 573204, Cannon Place, 78 Cannon Street, London EC4N 6AG, United Kingdom. Authorised and regulated in the UK by the Financial Conduct Authority. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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Important Information

Important information: Past performance is not a guide to future performance. Your capital is at risk. The value of investments and any income is not guaranteed and can go down as well as up and may be affected by exchange rate fluctuations. This means that an investor may not get back the amount invested. This document is not investment, legal, tax, or accounting advice. Investors should consult with their own professional advisors for advice on any investment, legal, tax, or accounting issues relating to an investment with Columbia Threadneedle Investments. The mention of any specific shares or bonds should not be taken as a recommendation to deal. Columbia Threadneedle Investments does not give any investment advice. If you are in doubt about the suitability of any investment, you should speak to your financial adviser. The analysis included in this document has been produced by Columbia Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice and should not be seen as investment advice. This document includes forward looking statements, including projections of future economic and financial conditions. None of Columbia Threadneedle Investments, its directors, officers or employees make any representation, warranty, guaranty, or other assurance that any of these forward-looking statements will prove to be accurate. Information obtained from external sources is believed to be reliable, but its accuracy or completeness cannot be guaranteed. Issued by Threadneedle Asset Management Limited. Registered in England and Wales, Registered No. 573204, Cannon Place, 78 Cannon Street, London EC4N 6AG, United Kingdom. Authorised and regulated in the UK by the Financial Conduct Authority. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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