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Where to invest your money in retirement

Income investing for the over 50s

Important - This information isn’t personal advice. If you’re unsure if investing is right for you please speak to an adviser. Unlike the security offered by cash, all investments and their income can fall as well as rise in value, so you could get back less than you invest. Past performance isn't a guide to the future. Money in a pension isn't usually accessible until at least age 55 (57 from 2028).

Emma Wall
Head of Investment Analysis

Emma heads up the team responsible for analysing and selecting funds for inclusion on the Wealth Shortlist.

After decades of saving and trying to grow as much wealth as possible, have you stopped to think about how your savings will provide your income in retirement?

Converting your savings into income can be harder than building them up in the first place - logistically and emotionally.

The thought of no longer receiving a wage and living off your savings can feel uneasy, especially when you need to battle against inflation (the rising cost of living) and low interest rates.

We’re also living longer, healthier lives – which is great, but it means our income sources need to stay in good shape for longer too. It might be why more people are choosing to reduce their working hours first before heading into full-time retirement.

The good news is, with sensible expectations, and a well thought out plan, choosing to invest your money to fund your retirement income can be a rewarding strategy for those willing to accept the risks.

The question is, what investments can you choose that’ll pay the income you eventually want?

What choices do you have?

There are many different types of investment available, including bonds, funds, shares and buy-to-let properties. After putting enough cash aside to meet rainy day needs and emergencies, investing money in these types of assets has many advantages over holding all of your savings in a bank account.

For buy-to-let properties, generally you find yields of about 3-5% which can seem appealing, but this can become less attractive once you take off tax, maintenance and other expenses. It also comes with a hassle factor.

Historically investors had the option of switching from shares into government bonds to reduce risk and increase income, but not anymore. Today, bonds offer less in the way of income and, arguably, more risk.

Other investment choices could include infrastructure, VCTs, renewables and even aeroplane leasing. But you need to do your homework properly. Many alternative investments like these are expensive, high-risk and the drivers of returns can be more complex than conventional investments.

If having more secure income would give you peace of mind, you might also consider annuities. This is where you exchange some of your pension for a guaranteed income for life. You can even choose for your income to rise in line with inflation. But how much you get will depend on your age, pension value and the rates available at the time. Annuity rates are linked to bond yields, which are at multi-decade lows. Once set up they can't usually be changed so please consider your options carefully. Money in a pension isn't usually accessible until age 55 (57 from 2028).

A core retirement investment

Given how low bond yields are today, equity income could be the core asset class for portfolio's focused on generating income and growth for retirement. Equity income funds currently offer a yield after costs of 4-5%, and aim to pay a rising income while growing your original investment.

What's equity income investing?

The best companies grow their profits over many years, and some pay these out as dividends to shareholders. Looking for those with high yields, or yields you think could grow in the future, is what's known as equity income investing.

If retirement is still a few years away, or your portfolios focus is more on growth funds at the moment, you could consider switching over to these investments gradually.

If you already invest in income funds, but hold accumulation units (where the income is reinvested back into the fund), you could start by switching to income units. If you’re not ready to start taking the income yet, you can reinvest in more income units. But when you need it, you can choose to turn on the tap and have this income paid out to your bank account.

Best of British

Getting paid a decent income from equities can mean investing with a bias towards the UK. British businesses have a long history of paying generous dividends to shareholders, and the present yield on the broader UK market is over 4%.

To put that into context the broader global stock market yields only 2.51%. The UK therefore offers one of the highest levels of income in the world. Remember, yields are variable and aren't a reliable indicator of future income.

But since the EU referendum in 2016, the UK market has become more politicised and share prices have been dampened by negative sentiment. UK income funds have managed some growth, but they've been held back by worries about Brexit and the potential impact of a Labour government.

The good news is, we believe this means the UK market is better value than many overseas markets. And while share prices will fluctuate, dividends tend to be more reliable and often keep being paid, even during uncertain times. In today’s political climate that’s a comfort although, there are no guarantees.

For this reason, investors should be wary of turning their back on the UK completely. A core of UK income funds could be complemented with some overseas income funds to increase geographic diversity.

Complementing the core

Depending on your income needs, you might balance your portfolio by choosing some funds which focus more on growth.

You might also consider some exposure to bonds. Yields aren't what they used to be, but they can help diversify your income stream and smooth out some of the volatility you get with shares.

As ever, everyone’s position is personal to them. So you need to weigh up your objectives and appetite for risk before choosing investments, and creating your own portfolio.


3 investment ideas for retirement

Kate Marshall
Investment Analyst

Kate has been part of the HL investment team since 2011. Her main areas of expertise include Asian, emerging markets and European sectors.

In our view, income funds can be a great way to invest for people approaching retirement.

They hold shares in lots of different companies, which can help to smooth out the share price and dividend ups and downs that can come from holding a single company share. They also involve less legwork, as funds are looked after by a professional manager. Some also have some exposure to bonds, to provide diversification and potential stability during tougher times.

Below we take a closer look at some of the income funds available. These funds are listed in alphabetical order.

This is for your interest only, and isn’t personal advice on where to invest. All investments can fall and rise in value, so you could get back less than you originally invested. If you’re unsure, seek financial advice from a professional. Please read the key information and fund factsheets, including charges, of any investment before making your decisions.

These funds take charges from capital, which can boost income but reduce growth potential.

Artemis Income

  • Current yield of 4.05% (not a reliable indicator of future income)
  • Focus on companies able to pay consistent dividends
  • Run by one of our highest-conviction fund managers

Artemis Income

  • Current yield of 4.05% (not a reliable indicator of future income)
  • Focus on companies able to pay consistent dividends
  • Run by one of our highest-conviction fund managers

Invest now

EdenTree Higher Income

  • Current yield of 4.77% (not a reliable indicator of future income)
  • Aims to pay a regular income, but also offers potential long-term growth
  • A unique approach, while potentially avoiding some stock market volatility

EdenTree Higher Income

  • Current yield of 4.77% (not a reliable indicator of future income)
  • Aims to pay a regular income, but also offers potential long-term growth
  • A unique approach, while potentially avoiding some stock market volatility

Invest now

HL Multi-Manager High Income

  • Current yield of 4.42% (not a reliable indicator of future income)
  • An agile fund which takes advantage of attractive income opportunities as they emerge
  • Income paid monthly

HL Multi-Manager High Income

  • Current yield of 4.42% (not a reliable indicator of future income)
  • An agile fund which takes advantage of attractive income opportunities as they emerge
  • Income paid monthly

Invest now


5 golden rules to maximise your income

Kate Marshall
Investment Analyst

Kate has been part of the HL investment team since 2011. Her main areas of expertise include Asian, emerging markets and European sectors.

We’ve looked at the power of equity income investing, and how it can play a major role for any investor who’s approaching retirement.

Now here are 5 tips to help maximise your income potential so you’re ready to retire when you want to.

Remember, pension and tax rules can change, so the value of any benefits will depend on your circumstances.


1.  Work out what income you’ll need

Unfortunately the chore of paying the bills every month doesn’t just disappear when you retire. You can use our household budget calculator to estimate how much you might have to spend. Keep in mind your spending patterns will probably change, but it should give you a good indication of how much income you’re actually going to need. Then see how much your pension is on track to pay.

Pension calculator


2.  Explore how to take money from your pension

From 55 (rising to 57 from 2028) you can usually start taking money from your pension. When you do, you’ll have the chance to take up to 25% as a tax-free lump sum. You can receive this as one single payment, or in stages – it depends what you decide to do with the rest of your pension.

What you do with your pension is an important decision, so choose your options carefully. Make sure you understand them all and check your choices are right for your circumstances. Take advice or seek guidance if you’re unsure.

The government provides a free and impartial service to help you understand your retirement options - more on Pension Wise.


3.  Make sure you plan for tax

You might think tax will be less of an issue when you retire, especially if your monthly income is lower. But you need to remember any money you make from your investments is taxable, as well as any money you take out of your pension.

Download our guide for our top 10 tax saving tips.

Guide to saving tax in retirement


4.  Get your cash strategy right

As a rule of thumb, you should keep around six months’ worth of expenses in easily accessible cash accounts. But remember, inflation reduces the spending power of cash. So having a plan for any large piles of cash you don’t need right away (like the tax-free cash you might take from your pension) is important.

Our Active Savings service could help.

It lets you pick and mix easy access and fixed term savings from a range of banks and building societies, through the convenience of one online account.

Once you're set up there are no forms or paperwork to fill in when moving money around. So you can manage your cash all in one place with just a few clicks.

See how Active Savings can help


5.  Hold everything together in one place

ISAs, investments, pensions, and cash savings – your retirement income comes from different places. Life could be made easier by managing everything under one roof, assuming the service and costs match your needs.

HL lets you hold all of these together in one place. Making it easier to check on your investment performance, keep track of your income and how much you can afford to take, and make any changes if you need to.

Before transferring, please check that you won't lose any benefits or guarantees or need to pay high exit fees.

Find out more about transferring to HL



Get advice, speak to an expert

Expert financial advice gives you peace of mind that your financial future, and that of your family, is on the right track.

Speak to us today and find out how our advisers could help you.

There’s no hard sell and we won’t waste your time, or money. If it looks like you could be better off by taking advice, we’ll book your free initial consultation with a specialist. Together you can talk through your options, what advice you’re looking for, and the charges involved. No advice will be given as part of the initial consultation.

Book an appointment


The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Payment Services Regulations 2017 with firm reference 751996 for the provision of payment services. Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).