The value of investments and any income from them can fall and you may get back less than you invested.

Four ways staying invested will help your pension pot grow

Four ways staying invested will help your pension pot grow

Share

Since the introduction of pension freedoms in 2015, you have been able to access your pension funds once you reach age 55.

However, while it may be tempting to withdraw a large part of your pension pot immediately, this could be a mistake and have consequences later in life.

In fact, there are many good reasons why it might make sense to leave your money invested.

Build up a larger sum

By leaving your money invested in the stock market, you maximise the chances for it to continue to grow and provide a better income for you in retirement.

History shows that stocks and shares provide better returns than cash over the longer term [1] and from age 55, you could easily have a further 20 years to save and see your money grow.

Even if you are worried that there could be a recession coming, Brewin Dolphin research has shown that the best years to be invested are often the years preceding a recession.[2]

Avoid unnecessary tax

Most people will still be working through their 50s and much of their 60s and for some, even relatively small pension withdrawals could push you into a higher tax bracket.

Based on the income tax rates for 2019/20 tax year, you can earn up to £50,000 per annum before you start paying the higher rate of tax.

So, someone earning a salary of £46,000 a year would only be paying basic rate tax of 20%.

If they withdrew a further £10,000 of taxable income from their pension, only £4,000 of this sum would be taxed at 20%, and the remaining £6,000 would be taxed at the higher rate of 40%.
In other words, the added income from pension drawdown could mean you pay more tax on it than if you accessed it in a different way down the line.

Save enough for old age

You are likely to live longer than you think. Even at age 65, statistics[3 ] show that you are likely to live for another 20 years, so you may need more money than anticipated for long-term care.

It’s wise, therefore, to make sure you have enough money saved for a comfortable retirement.

Take an income while staying invested

Another option is to keep most of your money invested and withdraw a small amount each year to top up your earnings, or take an income directly from your pension fund whilst leaving it invested in the stock market.

This is known as income drawdown and you can read about it in more detail here.

 

 

[1] Source: E Dimson, PR Marsh and M Staunton, Global Investment Returns Database 2018 (distributed by Morningstar Inc).

[2]https://www.brewin.co.uk/individuals/insights/further-thinking/worried-about-a-correction-the-case-for-staying-invested/

[3] https://www.ons.gov.uk


The value of investments can fall and you may get back less than you invested. 

Please note that this document was prepared as a general guide only and does not constitute tax or legal advice. While we believe it to be correct at the time of writing, Brewin Dolphin is not a tax adviser and tax law is subject to frequent change.  Tax treatment depends on your individual circumstances; therefore you should not rely on this information without seeking professional advice from a qualified tax adviser.

Past performance is not a guide to future performance.

No investment is suitable in all cases and if you have any doubts as to an investment's suitability then you should contact us.

The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

Saving for Retirement

Realise your retirement ambitions. Download our guide to Saving for Retirement for ideas on how to plan effectively.
Read More

Your next steps

Manage Your Wealth

Start a conversation

Find out how we can help guide your wealth journey, by requesting a callback from a member of our team.

FIND OUT MORE
CLOSE

REQUEST A CALLBACK

I am ready to start a conversation

Find out how we can help guide your wealth journey.

We will match you to the Brewin Dolphin office that is closest to your Post Code for your initial conversation.

Please select if you would like to choose a Brewin Dolphin office other than the one closest to your post code.

Understanding your level of wealth will inform our conversation about which services would be most suitable for your circumstances.

Are you a Brewin Dolphin client?

We respect your privacy and take protecting it very seriously. We will only use your data in order to arrange a meeting to discuss your needs (as explained above) and as set out in our Privacy Notice. In keeping with our existing practice, we will never sell your personal data to any third parties. You can change your preferences for how we use your data at any time by contacting your usual contact at Brewin Dolphin by phone, post or email. Please allow 14 days from receipt of your information for any changes to be reflected across our systems. 
We do not sell, rent or loan any identifiable information collected on this site. Any information that you give us will be treated with the utmost care and security. It will not be used in ways to which you have not consented.

Get Started in Minutes

Start investing online

Start investing from £2,000 with the Brewin Portfolio Service. Sign up online. Simple, accessible and cost efficient. Capital at risk.

FIND OUT MORE

Receive Our Insights

Stay updated

Receive email updates with news and views from Brewin Dolphin and information on our products and services.

FIND OUT MORE
CLOSE

Newsletter Signup

Stay updated

Receive email updates with news and views from Brewin Dolphin and information on our products and services.

Capturing your post code will allow us to tailor some of our communication to include regional views and updates that may be of interest to you.

We respect your privacy and take protecting it very seriously. We will only use your data in accordance with your preferences stated above. In keeping with our existing practice, we will never sell your personal data to any third parties.

If, in the future, you would like to update any of your marketing communication preferences, you will receive an email that will provide a link to our Preference Centre.