Investing for income in retirement
These key considerations can help you to create a sustainable income stream.
Important Information: This isn’t personal advice. All investments can rise and fall in value, so it’s possible to get back less than you invest. Remember past performance doesn't predict future results.
Optimising your investment strategy
Review your financial foundation and spending
It’s a good idea to keep reevaluating your spending, including healthcare and leisure activities, and adjust your saving and investment strategy as needed.
Continue to keep a substantial cash buffer to cover any expenses you expect (e.g., utilities, groceries, holidays) in the next five years and maintain an emergency fund for the unexpected (e.g. repairs, health costs) to avoid disrupting your investment plan.
Refine your investment strategy
As your investment horizon or risk appetite reduces, you might want to shift your focus to stability and preservation. This could mean prioritising lower-risk investments that offer a stable income (like bonds and dividend-paying stocks) and reducing exposure to high-risk options (like equities).
However, if you want to continue growing your investments, perhaps for your loved ones to inherit later, you might decide that a balance between income-generating assets and growth investments is more appropriate.
Regular reviews
Regardless of how or where you invest, you still need to regularly review your strategy and investment performance to ensure it aligns with your changing financial situation and goals. Adjust as needed for changes in income, expenses, or tax regulations.
Investment ideas for income
The first three investment ideas have been selected by our research experts for their income potential. However, they are not personal recommendations. When choosing investments, ensure they match your objectives and fill a specific need in your portfolio. Understand the risks of each investment and aim to diversify your portfolio to help mitigate risk.
Remember, all investments can rise and fall in value, so you might get back less than you invest. Income is variable and not guaranteed. If you’re unsure about an investment, ask for investment advice.
Troy Trojan
- Strategy: Conservative total return fund investing in a mix of shares, bonds, commodities, gold, and cash. Focuses on well-established companies and government bonds, with a small number of concentrated investments.
- Use: Could provide stability within an adventurous portfolio, or as a foundation for a conservative portfolio seeking modest long-term growth with some shelter during market downturns.
- Specific risks: Investing in smaller companies increases risk. A concentrated portfolio means each investment has a significant impact on performance, adding risk. The fund may underperform during rapid market rises.
Artemis Income
- Strategy: UK equity income fund focused on dividend-paying companies. Aims to outperform the FTSE All-Share by selecting businesses with sustainable income potential, even in challenging economic conditions.
- Use: Could be considered when creating the foundation of an income portfolio, diversifying global portfolios, or enhancing income in portfolios that include bonds or global equity income funds.
- Specific risks: Charges are taken from capital, which can increase yield but reduce potential capital growth. Dividends are not guaranteed and can fluctuate based on company performance.
Baillie Gifford Sustainable Income
- Strategy: Mixed-asset fund investing equally across shares, property/infrastructure, and bonds, with a focus on sustainable income and ESG considerations. Aims to deliver income growth above inflation over the long term.
- Use: Could be considered when diversifying portfolios focused on growth or income, hoping to provide consistent income with lower volatility due to diversified asset classes.
- Specific risks: High yield bonds, emerging market exposure, and derivatives add risk. The majority of the fund is in shares, which may increase volatility compared to other mixed-asset funds.
This fund has a holding in Hargreaves Lansdown PLC.
HL Income Fund
- Strategy: A balanced fund designed to provide monthly income by investing in a mix of shares, bonds, and cash equivalents, with a focus on preserving capital over the long term.
- Use: Could be considered by investors seeking regular income with a moderate risk level, aiming to maintain the initial investment while generating a 3-5% annual income.
- Specific risks: The fund's value can fluctuate, and income payments are not guaranteed. Regular income distributions may limit the fund's potential for growth, and investing in smaller companies and high yield bonds adds risk.
This fund is managed by Hargreaves Lansdown Fund Managers Ltd, part of the Hargreaves Lansdown Group. If you invest, HL will receive the fund's management charge, as well as the platform fee.
Get advice on your investment choices
If you're not sure how or where to invest, you should consider getting advice from a professional.
Our financial advisers can work with you to understand your investment goals, risk appetite and affordability to create an investment portfolio to match your needs and align to your financial goals.
Managing your income
Using cash from non-pension sources first
- Pros: Using cash accounts and ISAs to cover income needs can be tax efficient. This approach allows your pension to grow for longer, potentially increasing the value of your tax-free cash (if you haven’t already taken it all) and protecting assets from creditors and inheritance tax.
- Cons: Depleting emergency cash reserves might leave you unprepared for unexpected expenses. Maintain a healthy cash buffer to avoid this risk.
Securing more guaranteed income
As you get older your attitude towards investing and risk might change. One way to secure a guaranteed income, that doesn’t depend on the stock market, is to buy an annuity. Often the older you are, the better the rates can be.
Note: Accessing money from your pension is a complex decision with permanent consequences. Get guidance on your options from the government’s Pension Wise service or consult a financial adviser to create a strategy that fits your specific needs and goals.
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Help and support
Take a look at our most frequently asked questions for quick answers.
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