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What to invest in for retirement income

We share how to generate an income in retirement and the types of investments that can help you reach your goals.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

Having enough income in retirement is one of the biggest concerns people have as they get older.

You might have existing ISAs or pensions that allow you to invest tax efficiently, and up to now you may have been investing for growth.

But what are your options if you're specifically looking to generate an income from your investments in these accounts? Either with a view for taking drawdown, or withdrawing money from an ISA.

This article isn't personal advice. If you're not sure whether an investment is right for you, ask for financial advice. All investments and any income from them can fall as well as rise in value, so you could get back less than you invest.

What you do with your pension is an important decision that you might not be able to change. You should check you're making the right decision for your circumstances and that you understand all your options and their risks. The government's free and impartial Pension Wise service can help you and we can offer you advice if you'd like it.


Bonds are most commonly used for generating 'fixed income' across investment portfolios.

Investing in a bond and holding it until it matures means you'll generally know exactly what cash payments you'll receive between buying and the maturity date. This makes it easier for you to plan future cashflows.

But there's always a risk that the bond issuer will default and either not pay you what was initially agreed, or just not pay you at all.

While it's not that common, it's partly why investing in a single bond can be risky. It often makes more sense investing in a portfolio of different bonds and the easiest way to do this is to invest in a bond fund. That way a specialist bond manager can do the hard work for you.

Bonds come in different flavours. But, broadly, there's a scale of returns based on how creditworthy the bond issuer is.

Generally, the more creditworthy they are, the higher their credit rating will be and the lower the rate of interest. The less creditworthy an issuer is, the higher the rate of interest, but a bigger risk that the issuer won't make all of their interest payments or pay you back.

Bonds can also add diversification to a portfolio and are usually less prone to ups and downs than shares.


Company shares can be another useful source of income, in the form of dividends. Unlike bonds these aren't fixed or known payments. Instead, they're normally linked to company profits. That said, many companies that pay a dividend try to keep it at the same level or increase it each year. But, dividends are never guaranteed.

How much you get from a dividend varies considerably from company to company, industry to industry and region to region. It's usually the large, mature companies that don't need to spend lots on capital investments who pay the biggest dividends.

As with bonds, when investing in shares, it can be a good idea to consider investing in funds so you can spread the risk by investing across different companies, areas and sectors more easily.

Why invest for income at all?

Why not just invest for capital growth and then withdraw what money you need as you need it?

This is a reasonable question. The biggest challenge with this way of approaching investing during retirement is you could end up withdrawing from your investments at the wrong time.

Most people will want to be generating a reliable amount of money each year from their investments. But markets go up and down and it's likely that at some point you'll need to withdraw money after a large market drop.

This can have a very negative impact on your long-term returns. And if you can't hold out until markets recover, you could miss the rebound.

Taking a natural income (interest from bonds or dividends from shares) helps with this problem. It means that if you do need to withdraw some money during a period of market stress, you'll hopefully not have to take as much money out from your capital investment.

Remember though, income is variable, and no dividends from shares or interest from bonds is ever guaranteed.

If you don't wish to take a variable income from a pension and want a fixed rate, you could consider an annuity.

Unlike other retirement options, you don't need to worry about how much to withdraw or what the stock markets are doing. Your income will be paid no matter what happens.


Investment options

Our Wealth Shortlist is a selection of share and bond funds, as well as funds that mix the two, that our analysts believe have the potential to outperform their peers over the long term.

View the Wealth Shortlist

If you're looking at shares, you could also consider investment trusts. These are companies whose business is to invest. They're similar to funds but are traded on a stock exchange like a share. Because investment trusts are companies, they're able to control their dividend payments as they like.

This means they can hold back some of the income they generate in good years, to supplement lower levels of income in poorer years. This smooths out their dividend payments over time, which can help you plan how much income you'll likely get, though as with shares and bonds, yields are variable and not guaranteed.

Discover Investment Trusts

Introducing the HL Global Corporate Bond fund

This new fund will allow you to build a diversified portfolio giving exposure to Global Corporate Bonds. The fund aims for growth, but will also provide an income.

Explore our new fund

The HL Global Corporate Bond Fund is managed by our sister company Hargreaves Lansdown Fund Managers Limited.

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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