Staying invested in retirement
The value of a pension and the income from it can go down as well as up – and you could get less than the amount that's been put in.
The decision to access your pension is an important one and will affect your income and possibly your standard of living for years to come.
Therefore we recommend that before any decision is made you receive regulated financial advice or get free guidance from Pension Wise.
Introduction
Many people choose to stay invested at retirement if they have income from a part-time job, an annuity or income drawdown from another pension. If your investments perform well this could mean you have more money to spend in later life (but if they perform badly you could end up with less).
The decision to access your pension is an important one and will affect your income and possibly your standard of living for years to come. Therefore we recommend that before any decision is made you receive regulated financial advice or get free guidance from Pension Wise.
Three reasons to leave your money invested
1. You have the potential to grow your investments further
Even a few extra years investing could mean more money in your pension account, thanks to the effect of compounding. As ever, it’s important to remember this is not guaranteed and investments can fall in value as well as rise.
2. You might not need the money to last as long
If you can afford to hold off using your money for a few years, you could then potentially take out more every year without worrying about it running out or buy an annuity at a later age that pays a higher income.
3. You can pass your pension on
You can nominate a beneficiary by completing an expression of wish form, so your pension can be paid to your loved ones should the worst happen. There are potentially valuable tax benefits involved, should you die, in leaving your pension savings to your beneficiaries. This is because money in your pension will normally be deemed to be outside of your estate for Inheritance Tax purposes (although this is due to change on 6 April 2027).
However, you should be aware of the following:
If you die before the age of 75
If you die before the age of 75, your pension can generally be paid out as a tax-free lump sum to your beneficiaries subject to the lump sum and death benefit allowance (LSDBA). If your beneficiaries take your pension as drawdown or as an annuity, then the LSDBA doesn't apply and payments will be tax-free if paid within 2 years of notification of death.
After 2 years of notification of death or if you die after age 75, your beneficiaries have the same options, but they’ll have to pay income tax on the benefits and the LSDBA won’t apply.
If you die after the age of 75
Your beneficiaries will still be able to take the money as a lump sum, but this will be taxed based on their marginal rate of income tax when they receive the money.
Please note that the UK Government has announced that from April 2027 unused pensions will be included in the calculation of the value of estates for Inheritance tax purposes and could therefore be subject to Inheritance Tax.
What to consider when keeping your money invested?
Review your risk appetite
It's important to understand how much risk you’re willing to take with your investments as this will affect how much they rise and fall which can, in turn, affect your retirement income and how long it lasts.
Life expectancy is on the rise
More people are living for longer which means people's retirement incomes will need to last longer than they used to.
The long-term impact of inflation
Even a low inflation rate, over a long time, will reduce the value of your savings so your investments need to keep pace.
Risk of running out of income
Your retirement pot needs to last your lifetime so the longer you live and more you withdraw from it, the chances of running out of income increase.
Careful consideration should be taken around how much and how often you withdraw and how your money is invested to make sure your pension pot will last as long as you need it to.
Investing beyond retirement with Bestinvest
If you're looking to invest beyond retirement, here's how Bestinvest can help you.
Get investment ideas from The Best™ Funds List
The Best™ Funds List* features our take on the ‘best’ funds from across the different sectors. These are the ones that we think are capable of doing better than their peers and the benchmark. Of course, we can’t guarantee this, but we do have real conviction in them.
*The Best™ Funds List is a trademark of Bestinvest.
Let our experts manage your pension investments
Our Ready-made Portfolios are built and managed by our experts. Simply choose the portfolio that best suits your needs and your money will be invested in our best and latest ideas.
Invest with help from an Investment Coach
You can keep control of your investments but benefit from the guidance of a Coach. Coaches can't provide specific advice about where to invest but they can offer general investment education, guidance and support.
Need more help?
If you can't find the answer to your question, get in touch or we'll be happy to call you.
