Your Retirement’s In Danger Unless You Take Action Now

There has been a slew of studies released recently on the dangers the younger generations face in retirement, from underperforming pensions over the next few decades.

Some of this is due to worries about future market returns. A lot of it is due to employers making such miserly matched-pension contributions. The main danger though is that most people will take no action to address any of these issues – or will act on it too late.

This video is so jam packed full of charts that we couldn’t recreate it as an article, but it’s essential viewing if you care about retirement. In the video, we’ve gathered up the findings of multiple reports that highlight the dangers heading down the road.

We’ll remind you of the importance of prioritising your pension, and the consequences if you don’t. We’ll look at some shocking statistics about pension awareness, and finally – we’ll tell you what you can do about all of this to get back on track to a comfortable retirement. Let’s check it out!

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The 8 Retirement Blunders To Avoid

Today we’re looking at 8 retirement blunders that you need to avoid. If you get your retirement strategy wrong, you will likely retire poor, and your later life will be unpleasant or even destitute but avoiding these mistakes will help you to retire rich.

If you’re new to retirement investing and want the professionals to manage your money, a great option for hands-off investors is to open a SIPP with Nutmeg. They will build and manage your portfolio on your behalf in just a few clicks. New customers who use the special link on the Money Unshackled Offers page, will also get the first 6 months with zero management fees. If you’d rather manage your retirement investments within an ISA, check out our hand-picked range of ‘do-it-yourself’ Stocks & Shares ISAs.



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#1 – Not Saving Enough

According to, almost 4 in 10 British adults don’t have a pension, including 1.4 million people who are within a decade of retiring.

Assuming you retire at State Pension age, which will be age 68 for most of our audience including us, then you will need to have enough money tucked away to fund 14 years of retirement if you’re a man or 16 years if you’re a woman based on the UK’s average age of death. And of course, you may live far longer than this, so you need to factor that in.

Required retirement income, by lifestyle

According to a Which? Study, these are the annual incomes needed to fund different qualities of lifestyle during retirement. A single person would need £13k just to pay for the absolute essentials like food and rent. That rises to £19k for a comfortable lifestyle and £31k for a luxury lifestyle. Bear in mind that even the money required for the Essential lifestyle exceeds that of a full State Pension.

Which? go on to state that for a single-person household, achieving a comfortable retirement would mean a pot of around £192k alongside the State Pension to get to an annual income of £19k via pension drawdown, or to reach £19k using an annuity you’d need nearly £306k.

We don’t know how exactly they’ve worked this out, but we tend to use the 4% rule. With the State Pension providing around £9k a year, that means you would need to find an extra income of £10k a year yourself. So, using the 4% rule we would say you’d need a pot of £250k.

Also, many people are paying into a workplace pension without realising how little they are actually saving. The headline 8% that you get on auto-enrolment is total nonsense; it applies only to your qualifying earnings, which is earnings between a lower and upper limit that’s set by the government.

The lower limit is currently £520 a month, which means if your salary is £25k, then you’re contributing 8% on just £18,760. Your total pension contribution is just £125 a month, and remember you need hundreds of thousands at retirement.

Basically, if you’re a low earner, then you’ll barely be making a dent on your required pension size because that lower earnings limit makes up a larger proportion of your overall salary.

Most of our viewers will have even loftier ambitions and will be seeking to retire much earlier than when they qualify for the State Pension, and they might need to fund 40-plus years of retirement. People tend to neglect saving properly for retirement because it always seems like tomorrow’s problem.

#2 – Delaying Investing

Investing works best when it has time to compound. Compound interest or compound investment returns behaves like a snowball. A small snowball can roll and get exponentially bigger and rolls faster as it gathers more snow. This is precisely what happens when you invest. Plus, the more time you give to your pension to grow, the less you have to contribute overall making your monthly retirement savings far more manageable.

Don't delay - start today!

Hargreaves Lansdown produced this excellent graphic showcasing the impact of time on your projected retirement pot. The graph shows how much you will have at age 65 by investing £125 a month starting at different ages. Roughly speaking, every ten-year delay wipes out approximately half of the fund’s potential growth.

We actually think they have been very conservative by only using a 4% growth rate, which even ignores inflation. The impact of time would be even more telling had they based it on say an 8% return, which is what we think the stock market will return on average.

#3 – Never Reviewing Your Pension

Pensions are hardly the most interesting of topics and this is coming from a couple of guys who are passionate about investing. Our problem is that because its inaccessible for decades it just doesn’t have the excitement of a Stocks and Shares ISA – people want to get rich quick, which is the exact opposite of what a pension does. As a result, people tend to neglect the management and performance of their pensions which can be a very costly mistake indeed.

Research done by Hargreaves Lansdown found that only 37% of non-retirees had a clear idea what all their pensions were worth.

The biggest issue is likely to be the default funds being used in your workplace pension. Our research found that most default funds are investing in low performing assets with needless home bias to the UK market. We believe a globally diversified portfolio is likely to give the best balance of high returns and safety due to your exposure being spread across all geographic regions.

If you’re managing your pension investments yourself in a SIPP, which often provide the widest investment range and lowest costs, then it’s vital to review your pension every so often – perhaps yearly. Don’t forget to occasionally rebalance your investments, as over time your exposure to any one fund, stock, or region could drift away from your intended allocation.

It’s also a good idea to review the fees that your pension provider and funds charge. Fees across the industry have been cut in recent years, so always make sure you’re not overpaying with your current provider. We have an excellent guide which looks at all the best SIPPs, so check that out next.

#4 – Turning Down Employer Contributions

The good news is that every employer must pay into a workplace pension if you do. The bad news is that some people don’t take full advantage of this and are effectively turning down free money. Essentially any money you contribute gets an instant 100% return.

There are very few reasons that we can think of where it makes sense to not pay into a workplace pension up to the maximum matched percentage. Otherwise, you’re just throwing money away.

#5 – Only Using A Pension

There are many ways to build wealth and investing in a pension is just one of them. Unfortunately, it seems that the average person – at least those saving for retirement – only ever considers using a pension.

Ben’s (MU co-founder) preferred wealth builder is buy-to-let property. It’s obviously not quite as effortless as a pension but there many other benefits, including leveraged gains and the ability to access the money at any age. In fact, we did an entire article and video demonstrating how you can make 25% annual returns in property passively, which you should check out if property investing is of interest to you.

Another excellent way to build a retirement pot is using a Stocks and Shares ISA. These are very tax efficient as they avoid most taxes such as capital gains tax, which means your investments can grow unopposed from the taxman.

The second advantage of ISAs is you can withdraw the money whenever you like. This flexibility makes them incredible when used alongside pensions as you can effectively retire early and use the ISA to bridge the gap between your early retirement date and when your pensions become accessible.

Our third way we love to invest is using a spread betting account to invest in financial futures. This is super complicated and extremely risky and probably not suitable for most people, but for transparency we’ve included it here.

We use 3x leverage on this part of our portfolios to supercharge our investment returns. If you’re an experienced investor you should check out these articles/videos next [Spread Betting Startegy Overview, Step-By-Step Guide] where we explain exactly how we use spread betting to earn mega returns.

#6 – Assuming The State Will Provide

Research in 2020 found that 1 in 6 workers over 55 had no pension provisions other than the State Pension. Frankly, these guys are in serious trouble. As we mentioned earlier the State Pension is currently a little over £9k a year, which is £180 a week and this does not even cover the most basic of lifestyles.

And don’t assume that you will get the full pay-out either. You need to have paid National Insurance tax for 35 years, known as an NI qualifying year, otherwise you will only get a proportion of it. For example, if you’ve only paid 20 years that is 20/35ths, so you’d only get £103 a week.

In most circumstances you should be able to accumulate 35 years of NI qualifying years, but some people may not if they take a career break for example.  You can always make voluntary NI contributions every year to qualify, for instance if you retired young.

You can easily check your state pension record by searching Google for ‘check-your-state-pension’ and visiting the government’s website.

What’s more, there are whispers in the finance community that doubt whether the government can afford to continue paying a state pension to everyone for much longer. The country is broke, and the state pension is just a humongous pyramid scheme, which relies on current taxpayers to fund the current crop of pensioners.

There is a possibility that the state pension will be means-tested in the future, so don’t count on it being there for you. Personally, we plan as if it won’t even exist, and if it does it’ll be one hell of a sweet bonus for us!

#7 – Failing To Claim Back More In Tax Relief

Tax relief on pension contributions is one of those rare occasions when the taxman gives you something back. The government effectively pays 20% of your total contribution. For higher rate taxpayers this is 40% and for additional rate taxpayers it’s 45%. This means a £2,000 pension contribution could effectively cost you as little as £1,100.

However, the government only automatically adds the 20% tax relief to your pension, and you must claim back the rest if you’re a higher or additional rate taxpayer. You have to actively claim this money back though via your self-assessment tax return or by contacting HMRC directly. Many people are missing out simply by being ignorant of the tax system.

Not claiming their tax relief is one of the most common retirement mistakes people make and is literally throwing money away. Your tax-relief, once claimed, will either be supplied as a rebate at the end of the year, or as a reduction in your tax liability, or as a change to your tax code.

If you’re one of these unfortunate souls, you can thankfully make backdated claims, but you can only claim back any tax relief for the last four tax years.

#8 – Not Shopping Around When You Retire

So, the big day has arrived, and you can finally tell that boss you hate to stick the job where the sun don’t shine. Congratulations! You’re now retired.

You can normally take 25% of your pension as a tax-free lump sum, and after that there are two main ways to draw a taxable income.

One way is Income Drawdown, or Pension Drawdown, which is a way of taking money out of your pension to live on in retirement. The pension remains invested, and the investor draws an income from it.

The other is to buy an annuity from an insurance company, which provides a secure retirement income for life. If an investor chooses this option, they should shop around as rates can vary significantly.

No sensible person would ever take out car insurance or choose an energy provider without running a price comparison first because you know that the providers of such services will always rip off the complacent. The same is true if you take out an annuity from your existing pension fund provider.

According to a 2019 Which? report, shopping around for an annuity can increase an individual’s retirement income by up to 20%.

As a little sidenote to this point, before taking out an annuity be absolutely clear that it’s the right financial product for you. We here at Money Unshackled are not very fond of annuities because the rates are measly, and when you die all the money is usually lost. Those with guaranteed periods where your beneficiaries can benefit after your death naturally have even worse rates.

With your bog-standard single-life annuity, if you die relatively young having just taken it out you may have wasted hundreds of thousands of pounds, which could have been passed on to your loved ones.

Annuities are usually best for those who need a guaranteed income and cannot cope with the whims of the stock and bond markets. We believe the State Pension should be enough to provide a guaranteed income though for most people and should replace annuities as their base layer, to be topped up with riskier investment-based income.

Which of these blunders have you made and what other tips can you give to retirement savers? Join the conversation in the comments below.

Written by Andy


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UK Retirees At Risk Of Running Pension Pots Dry

We spend a lot of time looking at ways to become financially free and retire early should we wish. We regularly look at ways to slash unnecessary spending, boost income, invest better, reduce taxes, implement early retirement strategies and more.

And today we’re looking at an in-depth review of the current batch of retirees to see if we can learn anything that will help our own finances and retirement preparations.

Standard Life Aberdeen, an investment company, have surveyed 2,000 UK adults who were either due to retire in the next 12 months, or had retired in the past 12 months.

The report they’ve published is a treasure trove of information looking into the minds and finances of those retiring. In this video we’re going to share with you all the key points, so we can learn from those who’ve done it. Let’s check it out…

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Redefining Retirement

Only a few a years ago, before 2011, employers used to be able to force workers to retire at 65 (known as the Default Retirement Age). A few years later saw the most radical changes to private pensions for a generation, as everyone was given more choice in how they take their private pensions – previously they were almost always forced to buy an annuity.

These, plus many other factors have contributed to the changes to what it means to be retired.

We’d say there used to be a perception that retirees were sitting around and waiting to die – let’s not forget that it wasn’t that long ago when they were frequently called old age pensioners, which isn’t the most flattering of terms.

According to the Standard Life Aberdeen report, there is a noticeably growing trend towards flexible retirement and continuing to work in SOME capacity.

56% of the 2021 retirees don’t plan to give up work altogether, and 27% will work part time to support themselves. It’s not clear whether they are doing this out of necessity, but we suspect that many want to work a little.

We’ve long said that work is not the problem. It’s the number of hours of forced labour that you have to endure every week that’s the issue. It leaves no spare time to relax and enjoy yourself, but working on your own terms is a very different story.

If we apply this logic to our own early retirement plans, then maybe we don’t need to build such a large freedom fund after all. Maybe we should be looking to partial FIRE instead. FIRE stands for Financial Independence Retire Early.

Back to the report, 6% of the retirees want to set up their own business and 45% are looking forward to learning new skills. We can totally relate to this having ourselves always wanted to start a business, and the fact that these retirees now have more time and far less financial risk should they fail, means they can finally do what they always wanted.

What Does It Mean To Retire In 2021?

The average age of the retirees in the survey was 60. Three quarters were married or in a relationship, and the rest were not.

The average value of their pension pots is £366,000, which in our opinion seems a very good haul considering most people are very lax when it comes to retirement planning. Worryingly though, a third have less than £100,000, which has no chance of lasting for any meaningful amount of time.

On average, the retirees plan to spend £21,000 per year in retirement, so £100,000 for sure wouldn’t go far. £21,000 is almost £10,000 less than the average UK household income. Presumably as the average age is 60 most of them will own their home outright, so don’t have the largest household monthly expense to worry about.

So, what does it mean to retire?  The quintessential meaning is “spending time doing what I want”. That sounds like freedom to us and that is also exactly how we describe it.

44% see retirement as giving up work completely and 30% see retirement as never setting an alarm again – now that sounds good. And 19% plan to do charity work or volunteering.

We think it’s fair to say that retirement is about living life on your terms. No more doing soul-destroying work for a boss and job you hate, no more commuting in darkness bumper to bumper, and no more losing friends and relationships due to lack of time.

Will Their Pension Be Enough?

Ok, so far, we’ve mostly looked at the positive side of retiring but is all that affordable?

We’ve seen that the average planned spending is £21,000 a year, and according to Standard Life Aberdeen retirees would need around £390,000 in savings to retire at 60 on top of their future State Pension income, to cover their expenses over the course of a 30-year retirement.

Presumably that’s based on holding most of their investments in low risk, low return assets such as bonds and on running the pot down to zero, which differs from what we need in the FIRE community who might need our pots to last 50 years or more.

So, they need £390,000 but the average as we’ve seen was just £366,000, meaning some of them are in serious trouble. We can’t imagine what it might feel like to be 80 and broke.

The report says, two thirds of the retirees risk running out of money in retirement based on the average spend of £21k a year. It was a similar dire story no matter where they live in the UK.

We hate to say this as ambassadors of financial freedom but some of them – like the ones with only a hundred grand – should probably struggle on working a few more years. Every extra year worked is more time contributing to your retirement fund, more time for it to grow, and less time withdrawing from it. This might be easier said than done as things always seem to get harder when success is in touching distance.

For the rest of them, and assuming they’re invested in lacklustre assets, they just need to accept more investment risk to reduce the chances of them outlasting their money.

These are the estimates of what someone today might need at different levels of retirement as quoted in the report:

The minimum looks to be impossible, and we wouldn’t wish this on our worst enemy. How anyone can live off £850 a month in the UK is a mystery to us.

What’s being considered a moderate retirement is £20,200 a year for a single person. We might just about agree with this, but it really depends on whether the retiree owns their home.

The current state pension is just over £9,000 a year, so goes part of the way to covering their essential bills but that still leaves a lot that needs to be covered by their own savings. Disturbingly, 1 in 20 plan to rely the state pension alone.

Do They Feel Financially Confident?

37% are worried about not having enough money to last throughout retirement. And we think they’re right to worry.

As we’ve seen, most of them have not collected enough nuts for winter. Most of you reading this post still have potentially decades to correct this. Personally, worrying about money is one thing that we don’t want eating away at us, so we’ll certainly be aiming to overprepare.

48% plan to reduce their spending habits to support themselves in retirement. We don’t think this is as easy as they might think it is. Free time is often spent, literally. While you’re at work you probably aren’t spending much money, but when your diaries clear you will likely be out spending more – a lot more.

27% will work part time to support themselves in retirement and 21% plan to sell their property or downsize to fund retirement. We think downsizing is a great way of freeing up some money if needed. As the kids will have hopefully flown the nest, you don’t need to have all that capital tied up in a 5-bed castle if there’s just 2 of you.

Sources Of Income

The report only briefly covers this, so we don’t get that much insight. Almost one in five retirees say they plan to rely on one form of income. Not surprisingly pension pots are without a doubt the most popular option. We put this down to a few reasons:

  1. The government push pensions as the main retirement vehicle. This is truer today than it’s ever been with policies like auto-enrolment.
  2. Most people have a lack of financial discipline, so any money available in accessible accounts such as ISAs or savings accounts is probably spent on cars, holidays and house extensions long before retirement approaches.
  3. Most people never consider establishing multiple sources of income. Throughout their lives they’ve only ever had one – usually from a job, and so having one in retirement is normal to them.

If you watch our YouTube channel or read these blog posts regularly, you’ll know we always encourage having multiple streams of income.

How To Know If You’re Financially Ready?

The report gives some good advice about how to calculate when you’re ready to retire and it’s essentially the same as what we say here at Money Unshackled. Although, one major exception is everything they say is geared towards the retiree getting financial advice. Whereas we think most people are fully capable of running their own finances if they are prepared to do some research.

The 3 steps are:

  1. Estimate your annual cost of living. Take what you spend now and make some adjustments for the things you will no longer have – goodbye expensive slave unforms and commuting costs, and hello new costs like world cruises, or maybe more likely care costs.
  2. Calculate how much you have. Check all your pensions, ISAs, savings, and insurance products, and don’t forget to check what state pension you’re entitled to. You might even have the potential for an inheritance.
  3. Plan your estimated income. Here they encourage you to check out online calculators or speak to an advisor. If you’re hoping to retire young as WE do, we suggest you read up on the 4% safe withdrawal rate, which we’ve covered on our website and YouTube channel numerous times before.

What Are They Most Excited About?

The 3 things they’re looking forward to most are all forms of freedom:

  1. The freedom to have their own schedule.
  2. Simply not having to work.
  3. Spending more time with their family and friends.

Who Gets Retirement Advice?

Before we read the figures from the report our perception was that most people feel overwhelmed with investing and managing their personal finances, so when it comes to a big life event like retirement, they think a financial advisor can do it better.

The report found that 40% of soon-to-be retirees have already sought financial advice and 16% say it’s on their to-do list. Only 44% don’t intend to get advice at all.

Before the internet, learning about investing or anything for that matter was much harder, so professional advice was probably a good idea. Nowadays, you could spend a little of your time and learn everything you need to know and probably do it better yourself.

55% of the retirees research their options online, 30% ask friends and family for advice, and 23% get support and information from their employer. Just be careful getting advice from friends and family. It might be the blind leading the blind.

Words of Wisdom

And finally, is there anything we can learn from last year’s retirees? Their words of wisdom include:

  • “Theres a whole new happier world out there.” – we knew this all along.
  • “Factor in a little bit more [money] for the unexpected items” – sound advice for retirement and through life.
  • “Have a plan B” – again, invaluable advice. That’s why we aim for multiple streams of income.
  • “Have projects to keep you busy” – this one really is important. Make sure you have a plan as boredom really is a killer.

What are your retirement plans? Join the conversation in the comments below.

Written by Andy


Featured image credit: Timofey Zadvornov/

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

Best Place To Invest For Retirement

Whether you’re hoping to retire young or at state retirement age, where is the best place to invest for retirement? If you’ve never considered retirement planning properly before or just want to verify your retirement strategy, then this is the blog post for you.

We’re first going to consider what retirement means to you – because it means different things to different people – and then looking at the 5 main vehicles for saving for retirement, including an overview of each one and the cheapest platform to use.

We’ll then look at what makes a good retirement portfolio and finish up with some model portfolios.

Many of the investment platforms we’re about to mention just so happen to be offering free stocks, free money, or discounts when you use the links provided by us. So, before signing up, do check the Money Unshackled Offers Page.

Examples include 6 months free with Nutmeg, or a £50 welcome bonus with InvestEngine, a free stock with Freetrade worth up to £200, plus many more.


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What Is Retirement To You?

Almost everyone considers retirement to be when you stop working at old age – most people are fixated on age 65. Whenever we tell people we want to be retired asap, more times than not they respond by saying, “Don’t wish your life away”.

To them retirement is something that can only be achieved when your best years are behind you and probably when the government dictates it with the state pension.

We’re here to tell you that your retirement can be anything you want it to be, from sailing around the world from age 25 onwards right through to the traditional armchair at 65.

The more you deviate from the so-called norm, the harder it will be of course, but with dedication you can set your own path. You can do so much better than conforming to societal norms.

No matter what age you’re planning to retire, you will need an investment pot that produces an income from the day you stop working to the day you die.

First and foremost, you need to know how big that investment pot needs to be. Work out your expected living costs in retirement and divide it by 4% to give you your required pot size. 4% is generally what is accepted as a safe withdrawal rate.

Check out our other YouTube videos and blog posts as we go into this quite a lot, so we won’t repeat it here. You can lower the percentage if you want to err on the side of caution.

Don’t forget that your expected living costs in retirement might be much lower than they are today. You will have possibly paid down a mortgage, there will be no further need to save for retirement, and maybe the cost of raising children will be in the past.

We’ve built an awesome tool, that will help you determine when you can retire. It’s worth checking that out and coming back to it every so often to monitor progress.

State Pension – Don’t Count On It?

If you’re planning to retire at state pension age, you can also factor that in. The full new State Pension is over £9,000 a year, so could slash your required investment pot.

Check out this video & article if you want to learn more about what State Pension you’ll get.

Our word of warning is that the State Pension probably shouldn’t be relied on, especially for younger generations. Due to the dire state of the UK’s national finances, we expect some sort of means-testing to eventually come into play.

We personally plan as if it won’t be there and hope that it is – and if it is it’s a great little bonus!

If you’re planning to retire young, then obviously you wouldn’t be eligible for the State Pension for potentially decades anyway.

Vehicles For Saving For Retirement

Broadly speaking there are 5 main vehicles that can be used to save for retirement – and when we say save, we actually mean invest.

You cannot save long-term in cash, which includes savings accounts, cash ISAs, Premium Bonds, and so on. Cash has negative returns after inflation. You will have to accept a degree of risk in order to build up an investment pot that is big enough to pay for your retirement.

You should use as many of the following 5 vehicles as necessary. A good retirement plan will likely use most of them and perhaps all.

#1 – Workplace Pension

If you’re an employee or wage slave as we half-jokingly call them your employer must offer a workplace pension where they match your contributions up to a certain percentage. Take advantage of this to the max as it’s essentially free money.

You won’t be able to access this until at least age 55 – and it’s likely to be 58 according to the Government’s current policy. Even for freedom fighters aiming to retire young we would encourage you to fully utilise this, as you can cleverly manage your other retirement vehicles to live on until your pension accounts kick in. Although, we wouldn’t bother paying any more that what your employer will match as there are better alternatives, which we’re about to see.

The downside of pensions is that when you eventually draw an income from them, the amount taken will form part of your taxable earnings.

#2 – Self Invested Personal Pension (SIPP)

This account is very similar to a workplace pension. It will have the same tax benefits and the same access rules –being that your money is locked away until your late 50s.

SIPPs give you a great deal of control over what you invest in. Moreover, SIPPs can be much cheaper than workplace pension schemes if you choose your platform and investments carefully.

SIPPs are great for consolidating old workplace pensions into one convenient place. People now have an average of 11 different jobs during their career, and will often be enrolled into a new pension at each workplace – an absolute nightmare to keep track of.

Before consolidating your pensions though do check if there are any exit fees and/or safe-guarded benefits that you might lose by transferring – most modern workplace pensions will not.

We personally both have SIPPs, which we used to consolidate old workplace pensions, but are not currently adding more money to them as we’re focussing on accessible retirement strategies.

Whatever you pay into a SIPP or a workplace pension will get tax relief. Tax relief is paid on your pension contributions at the highest rate of income tax you pay. So:

  • Basic-rate taxpayers get 20% pension tax relief.
  • Higher-rate taxpayers can claim 40% pension tax relief.
  • Additional-rate taxpayers can claim 45% pension tax relief.

We’d love to do a full run down of the best SIPPs, but time is short, so instead check out the best SIPPs page here.

In summary, for most people Vanguard is likely to be the cheapest, but AJ Bell Youinvest isn’t far behind and gives a significantly wider investment range to choose from.

Freetrade have just launched a SIPP but strangely it’s not as competitively priced as their other accounts. There’s a fixed monthly cost of £10 – barely noticeable on larger pots of perhaps over £50k but not great for smaller retirement pots.

Nutmeg is our favourite robo-advisor SIPP. Their ‘Fixed Allocation’ portfolios cost just 0.45% plus fund fees, and we think this is ideal for anyone who wants an expert to choose their portfolio for them.

#3 – Stocks & Shares ISA

This account type is a beast and is likely to be the main investment vehicle used by those seeking early retirement.

You can currently deposit £20k every year and it’s very tax efficient. We’ve refrained from calling it tax-free because there are some minor taxes you might still have to pay, such as stamp duty and dividend withholding taxes.

The Stocks & Shares ISA is so powerful because you will never have to pay any capital gains or UK dividend tax no matter how large your ISA grows.

Secondly, there are no access limitations. You can literally withdraw whenever and as much as you want, and your withdrawals do not count as taxable income – so, you can probably see why we love Stocks & Shares ISAs so much!

Again, we’d love to do a full run down of the best Stocks & Shares ISAs, but for completeness instead check out the best ISAs page, found here. In summary and only broadly speaking, Interactive Investor is very good for pots over £50k who want choice. AJ Bell Youinvest is an all-round cheap platform with account fees of just 0.25% on funds.

Commission-free platforms include Trading 212 and Freetrade, and for those who want it managed for them, newcomer InvestEngine is an incredibly cheap robo-advisor.

Check out our Stocks & Shares ISA comparison page here for a thorough comparison.

#4 – Stocks & Shares Lifetime ISA (LISA)

This account is surprisingly not talked about that often but could be better than a SIPP for some people. With Lifetime ISAs you get a 25% government top-up on your contributions, similar to what a basic rate taxpayer gets on a SIPP, but just like other ISAs they never incur any further income tax.

Therefore, for basic-rate taxpayers a Lifetime ISA is likely to be financially better than a pension. However, higher-rate taxpayers are probably better off with pensions due to the higher tax reliefs.

Some downsides to the Lifetime ISA include a low contribution limit – you can only deposit £4k a year and this eats into your £20k ISA total allowance.

Secondly, you can’t access the money until age 60, without penalty. This makes it similar to a pension but insanely your Lifetime ISA savings will impact on any welfare benefits you might be entitled to, as the DWP factor Lifetime Isa savings into Universal Credit calculations. For this reason, we would tread carefully using LISA’s.

So, which is the best Lifetime ISA? Unfortunately, there is barely any platform choice. AJ Bell Youinvest is among the cheapest at 0.25% on funds, and Nutmeg is the cheapest robo-advisor that we’ve seen offering LISA’s.

We’ve not yet built a Lifetime ISA comparison page but it’s in the pipeline, so do check back if you’re thinking of opening a LISA.

#5 – BTL Property

BTL property is perhaps the most lucrative investment available to normal working people due to mortgage leverage. The returns can be enormous but there are also a lot of downsides.

Unlike stock market investing you can’t really invest and manage property while you’re taking your morning number two.

The drawbacks include unexpected bills, late paying or non-paying tenants, problem tenants, regulations, organising maintenance with tradespeople, tax complexities, your time involvement, and lots more. If you are able to take all of this on, then absolutely consider property investing.

The bulk of Ben’s (MU co-founder) retirement pot is in BTL property and his annual ROI has been around 20% – you can’t get that very easily in the stock market.

What Makes A Good Portfolio?

Other than the last point on property, all of the best vehicles for saving for retirement are geared towards stock market investing.

If you choose a robo-advisor you won’t need to concern yourself with this but for those going down the do-it-yourself investing route, we think a good portfolio should possess the following characteristics:

  1. Simple – You should have a clear understanding of what you are investing in and keep the number of assets you own at a manageable level. Complexity means higher costs.
  2. Low Cost – Fees matter. Keep them as low as possible. That also means don’t trade frequently as this is a guaranteed way to let fees spiral.
  3. Tax Efficient – Tax is an unwelcome evil. Use all the weapons in your arsenal to minimise it or even eliminate it. Remember it’s the after-tax return that’s most important.
  4. Diversified – Ideally globally and across multiple asset classes. The younger you are the more you can lean towards high-risk assets such as equity funds.
  5. Passive – Active investing incurs lots of fees and is on average unlikely to provide superior returns. Investing passively in an index allows you to invest with conviction. Being free from doubt means you won’t tamper with the portfolio, which usually only damages returns.

Model Portfolios

Following the characteristics just outlined, our ideal portfolio is what we’re calling the Money Unshackled Ultimate Portfolio.

It contains a developed world ETF, a developed world small cap ETF, an emerging market ETF, some gold and silver, and on top we would also hold some cash.

  • Invesco MSCI World ETF (MXWS)
  • iShares MSCI World Small Cap ETF (WLDS)
  • iShares Core MSCI Emerging Markets IMI ETF (EMIM)
  • iShares Physical Gold ETC (SGLN)
  • iShares Physical Silver ETC (SSLN)

We have a dedicated video and article covering this portfolio in more detail, found here for those interested.

A second portfolio we like is what we’re calling the Money Unshackled Vanguard Portfolio. This one’s based on two Vanguard ETFs covering the developed world and the emerging markets. This ETF combo works out cheaper than the popular single Vanguard All-world ETF and gives you some control over allocation between geographies.

If you like gold and silver, you could easily tack on those as well but there are no Vanguard ETFs for these. We suggest the iShares gold and silver ETFs.

  • Vanguard FTSE Developed World ETF (VHVG)
  • Vanguard FTSE Emerging Markets ETF (VFEG)
  • iShares Physical Gold ETC (SGLN)
  • iShares Physical Silver ETC (SSLN)

In addition to any ETF-based investment portfolios like the ones mentioned we also like to invest in P2P lending for the fixed income it provides, and Ben likes property for growth and regular cash flow.

What vehicles are you using to save for retirement and why? Join the conversation in the comments below.

Written by Andy


Featured image credit: Khakimullin Aleksandr/

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

Why Your Pension Is Failing You – SSAS/SIPP/Workplace Pensions

Unless you’ve taken a day to sit down and really review your pension situation, your pension is almost certainly failing you.

In the UK most of us just trust our financial futures to our employer, and just assume that our workplace pensions are being well managed – and that’s if we’re trying to be sensible.

The less sensible among us will be trusting their futures to the state pension – which is like putting your trust in a tiger not to eat you.

But this video is aimed at those who want their private pensions to shine, to outperform the mundane, and to set you apart in your retirement from the majority who are just barely able to get by.

We’ll show you how to get your pension working for you: how to withdraw money from it before you’re retired, how to break free of mediocre returns, how to add investment property into your pension, and how to dodge tax to the max while staying within the law. Let’s check it out!

Alternatively Watch The YouTube Video > > >

What Normal People Do

Most people in the UK of working age contribute to a Defined Contribution workplace pension. As well as this, they will hold several other workplace pensions from past jobs, probably one from each.

A UK worker will change employer every five years on average, which means your average 40-year-old will have 4 pensions on the go; 3 of which are no longer contributed to.

We were a bit more trigger-happy with the job-quittings when we were in the workforce, and between the two of us we’d racked up 11 workplace pensions by age 32 – none of which were doing a great job for us!

The problem with many workplace pensions in the UK is that they are UK biased. More than that, they are overly keen on low performing bonds.

One of MU co-founder Ben's old workplace pensions

Above is the breakdown of one of my old workplace pensions. Around 30% of it is bonds. For a 30-year-old, that is far too unambitious.

Bonds can be useful for people approaching pension drawdown age. But for someone with 3 decades to go until that happens, it’s frankly laughable.

Also, 38% is in UK equities – notorious for its low returns in recent decades. Why is this pension not investing larger amounts in the USA, the world’s economic powerhouse?

The answer? Workplace pension funds are stuck in the past, still conforming to home bias from the days before global investing became cheap and accessible.

Impact Of Home Bias And Too Many Bonds

The presence of too much UK equity and bonds is clear from the returns. This Aegon pension returned 5.5% annually over 5 years, which is 30% total growth:

Underwhelming performance of the old workplace pension

Over the same timeframe, a typical globally diversified equity fund – VWRL – returned 7.3% annually, which is 42% total growth. Lightyears ahead.

The problem with turning a blind eye to your pensions until you’re ready to retire is obvious – you’ve left it too late to make any necessary improvements.

The optimum time to get a grip on your pensions is the day you start your career – failing that, the next best time is today.

Finding out that your pension was invested in underperforming assets for the last 40 years at age 60 is not ideal. And yet this is what the majority will do.

Why Workplace Pensions Can Get Away With Poor Performance

They need to impress your employer – not you. And the wage-slave making the pensions decision for their company is unlikely to know much about investing.

A workplace pension provider could be chosen on the basis of sweet-talking the HR department better than the competition, rather than a proper long-term appraisal of their investment strategy.

What The Rich Do

Rich people don’t hold their futures in employee pension schemes. These schemes are too restrictive, with annoying rules that forbid you from accessing your own money until you’re at least 55.

Such rules don’t apply to the rich, nor to those aspiring to be rich who follow in their example.

They know better, and make use of a little-known type of pension called a Small Self-Administered Scheme pension, known as a SSAS.

SSAS Pensions – True Financial Freedom

A SSAS is a flexible pension usually for company directors of limited companies, managed by you (or by trustees that you appoint). Don’t let the ‘company directors’ part put you off – both Andy and I are company directors, as are many people who invest in property, as can be anyone who puts their mind to it.

We’ll come back to this point in a bit, but first let us tell you why you need to be aspiring towards having your future invested in this type of pension.

Once established, a SSAS pension can invest in all the normal assets such as stocks and shares, commodities, corporate bonds, and gilts – but it can also hold any investment property that you buy, and even shares in your own business.

It also gives you vast additional powers and opportunities, including getting your hands on your pension money whenever you need it, instead of in your late 50s like with other pensions.

Why You Should Have A SSAS Pension

#1 – Get Your Money When You Need It

You are allowed to make a loan of up to 50% of the value of your pension to your company for any use.

For example, you could use the funds in your pension to buy out part of your own company (i.e. giving you, the owner, a load of money). Alternatively, it could be structured as a loan to yourself.

Can you imagine dipping into your workplace pension at age 30? Well, you could, if your pension was a SSAS.

#2 – Invest In Property

As we touched on already, pensions don’t have to just invest in stocks and bonds – with a SSAS, you can use your pension cash to buy investment properties too.

One of our biggest annoyances with ISAs is that they can’t be used to buy properties (outright – we don’t mean REIT funds).

Well, a SSAS is an alternative tax-shielded product that you can do just that with, and still have some flexibility to access to your money at any age.

#3 – Very Tax Efficient

Contributions can be made by both you and your company – and because your company is probably you, this means tax loopholes!

SSAS pensions get the same basic tax benefits of other pension types, including:

  • Pension contributions are deductible against tax;
  • No income tax charge on investments;
  • No capital gains tax on investments;
  • A tax-free lump sum on retirement.

But SSAS pensions get extra tax benefits too:

  • Commercial property can be bought by the SSAS and leased back to your company, which may have tax advantages (also possible in some SIPPs);
  • Loans can be made to your business – the interest, which is effectively payable to yourself, could be tax deductible;
  • You have greater control over accessing lump sums, which might have tax advantages over normal pensions.

#4 – Fees Are Fixed

Fees are typically charged on a fixed basis rather than the traditional percentage charges for most normal pensions, and is shared amongst the members.

The ones we’ve seen cost between £300-£1,000 a year, no matter the size of your pot. This is great for wealthy people – probably not great for smaller pots.

How To Qualify

You usually need to become a company director, which can be of your own limited trading company.

Becoming a company director is not difficult – setting up a company online takes a few minutes and costs just £12 to do on the UK government website.

SIPPs – For Getting Your Finances In Order Now

Being a director with a SSAS pension is something cool to aim for maybe in the future when you have large funds to take full advantage.

But to help you get there, a SIPP is the perfect pension product for taking back control of your future, today, that anyone can open.

A SIPP acts like a workplace pension, but has the following advantages:

  • You can consolidate all previous workplace pensions into one SIPP which is under your control – what you invest in is completely your choice, not some pencil-pusher in HR;
  • The returns are therefore likely to be much better if you choose a more sensible mix of assets;
  • The fees are usually lower than what a workplace pension charges you.

The simplest SIPP we’ve come across is run by Nutmeg. It’s also one of the highest performing against their peers. You can see here how it smashes the competition:

Nutmeg SIPP performance

Over that same 5-year period as we discussed earlier, Nutmeg produced a 7.5% annualised return after fees, similar to the 7.3% we’d have expected from a global fund.

Nutmeg is a robo investing platform, offering ISAs and SIPPs. When you open one of these, you’ll be asked a series of questions, so that your portfolio is tailored to you.

Gone is the one-size-fits-all approach of the workplace pension, which tries to work for everyone, but ends up working for no-one.

You’ll also get 6 months without any fees if you find your way to Nutmeg via the link on the Money Unshackled Offers page. Check out the Nutmeg offer there if you want to open your own SIPP and get to grips with your pensions.

When A Workplace Pension SHOULD Be Used

There’s no doubt in our mind that a SIPP is preferable to an old workplace pension. But what about your current, active, workplace pension?

Your employer is probably matching your contributions to your current pension, in which case, that is a 100% return in year 1 and is free money which in most cases shouldn’t be turned down – regardless of how crappy the underlying investments may be.

For instance, I opened a SIPP for transferring my old workplace pensions into, which I’d accumulated from many previous jobs.

But I would always contribute into one current workplace pension, for the tax-free top-ups my employer would pay in alongside my own contributions.


Finally, you should ask yourself, do I even need a pension?

If you are able to set aside less than £20,000 a year, have no employer contributions, and are a basic rate taxpayer, then a Stocks and Shares ISA might be preferable to a pension.

You get similar tax benefits – the tax break comes when you draw from it, rather than during accumulation as with a pension, but it works out roughly the same in the end.

And you can retire whenever you feel ready – instead of a predetermined minimum age of 58.

As for us, we currently use SIPPs for our pensions, but as company directors we will be looking into transferring those into a SSAS as our wealth gets bigger.

But at least with our SIPPs, our investment returns are strong, our fees low, and our futures are in our hands.

What will you be doing with your pensions? Join the conversation in the comments below!


Featured image credit: Sauko Andrei/

Check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

Triple Your Pension Income – Optimal Safe Withdrawal Rate

How big does your pension pot need to be? The answer comes down to how big your income needs to be.

A basic retirement income doesn’t actually need to be that big – remember you’ve likely nearly paid off your house and sent the kids off packing by the time you can legally draw your pension. says the average pensioner spends just £12,500 a year.

Using an inflation linked lifetime annuity with Aviva, shockingly you’d need a pension pot of £700,000 to achieve this.

However, the average private pension pot for 55-65 year olds only stands at £105,000, which translates into a meagre £1,900 a year income using an inflation linked annuity.

The pathetic returns on annuities means that if you’re still young, you need to either start ramping up your monthly pension contributions big-time, or know how to squeeze every last penny out of your pension pot by using the stock market.

In this article we’ll show you how you can triple your pension income by trusting in the stock market, and for all you under-55s out there, hopefully get you thinking about whether you’re putting enough aside for retirement in the first place.

The New Approach To Pensions

It used to be that on retirement day you would legally have to buy an annuity with your pension pot. No longer. You still can, but the returns are a joke.

The Annuity approach pays you an income by swapping your pension pot for an insurance product – it’s the low-risk, terrible-return approach that guarantees you a basic income.

How basic? Well, to confirm what we suspected about annuities, we ran a quote through Aviva for the average UK pension pot size of £105,000 and were quoted a £1,900 annual income, inflation linked.

That’s equivalent to a 1.8% rate of return, but with all your capital surrendered to the insurance company – don’t let them have it!

The new approach to pensions is the Drawdown method – continuing to hold investments with your pension money, and drawing an income from them – rather than seeking certainty from insurance products.

The drawdown method weighs likely market returns against your likely lifespan, and trusts in capitalism to see you through. The rest of this article assumes we follow the Drawdown approach.

Risks Of The Drawdown Approach

If you get the Accumulation stage a bit wrong for a while, you can always course correct.

But in the Withdrawal stage, being old and possibly infirm, you probably can’t just go back and get a job if your pension income is insufficient to live on. You’re stuck with the cards you’ve dealt yourself!

You’ll also need a plan for managing longevity risk – the risk that your cash will run out before you pop your clogs. And finally, there’s sequence risk.

Sequence Risk – The Risk Of A Bad First Decade

Getting a good rate of return is more important in the early years of retirement.

We know the stock markets average around 5% returns after inflation – that’s 8% nominal returns minus 3% inflation. But that’s just an average.

Here’s 2 scenarios. In both, we retire at the earliest possible pension age for our generation, age 58, and have a good innings until age 88.

Fig.1 Sequence Risk (2 Scenarios)

Scenario 1: In the first 10 years your investments perform terribly, returning around 2% after inflation. We get to enjoy some good times in the decade before we croak, at 8% over inflation.

Scenario 2: Here it’s the opposite, with the good times happening early on and our final years spent grumbling at the news and chuntering that the young-uns are messing everything up: “those damn kids!”

So what’s the difference? In Scenario 1, we run out of money at age 76. In Scenario 2 we outlive our money.

Safe Withdrawal Rates

To make sure we don’t run out of money, some clever boffin (who we’ll get to soon) came up with the concept of a safe withdrawal rate – the amount you can cream off the top without damaging your pot.

You might have heard about the 4% rule. This is the amount you can withdraw safely from an American portfolio. It’s the amount you take out in year 1, and then you adjust it for inflation thereafter.

UK researchers might quote you closer to 3%.

This is because the UK stock market has underperformed the US on average by around 1% over the last 100 years, and bonds by around half a percent.

But these academics are living in the past – there’s no barrier now stopping UK citizens owning a majority of US market funds instead of UK ones!

Fig.2 UK Safe Withdrawal Rate is 3.1% (source: Abraham Okusanya, Beyond The 4% Rule)

Here’s the UK funds version – there are 86 blocks of 30-years between 1900 and 2015. 1900-1929, 1901-1930, 1902-1931, and so on.

We can see that the worst-case real-world scenario was 3.1%.

Pensioners using this rate would have survived financially through 2 world wars, the Great Depression, several recessions and the risk of nuclear war, without denting their portfolios at all!

A similar history applies for US funds, at a safe withdrawal rate of 4%.

Layering The Cake

The clever fellow who came up with the Safe Withdrawal Rate, Bill Bengen, suggested that it can be increased by adding layers like you would to a cake.

You can take that 4% and ramp it up quite significantly by making your retirement plan smarter.

Layer 1 – Adjust For Spending Patterns

Older people spend less. It’s a fact. New retirees in their 50s and 60s will spend about 50% more than they spend by age 80. We should recognise this in our retirement plan.

Here’s a tried and tested way to do this gradually: if you skip your inflationary income rise on every market down-year – that’s on average once every 4 years – history shows you could have added 0.6% to your initial withdrawal rate.

Layer 2 – Asset Allocation

The 4% rule is based on a 50/50 portfolio split of equities to bonds, but according to the research, you could sack off bonds, and have 100% allocation to equities instead. “Blasphemy”, we hear you say. “Pensioners need bonds to stabilise their pension!”

Except, interestingly, the history of the last 115 years tells us that a 100% stocks portfolio would have survived with a higher safe withdrawal rate than one split 50/50 stocks to bonds according to Bengen’s models – 0.5% higher.

But we do hear you. We ourselves probably wouldn’t want 100% in equities in old age, even if it does have the best history. We’d sleep better at night with some diversification.

Layer 3 – Small Caps

Further studies show that having 25% of your portfolio in small-cap stock funds over the last hundred years allowed for a higher withdrawal rate even in the worst years.

Doing this would have in fact added 0.4% to the safe withdrawal rate.

Layer 4 – Probability

This is the final layer, and up until now the cake could be baked so as to remain whole for your lifetime. But this final layer accepts that you won’t live forever – the longevity risk.

By running 10,000 simulations of different periods of stock market history, it’s been calculated that adding an extra 1% to your initial withdrawal rate gives an 83% chance that you won’t run out of money.

And that’s increased to an 87% chance of success when we factor in the high chance of dying before age 88 – i.e. 30 years after retiring at 58.

That means 13% of the time, this strategy will fail – in almost all cases, it will be due to sequence risk – the risk of having a bad first decade.

So, failure doesn’t mean you just keep ploughing ahead – you’ll get an early warning from the markets and course-correct in the early years, maybe by downsizing your home or living less lavishly to make up the difference.

Whether a much better lifestyle in retirement is worth the 13% risk of having to course-correct is of course your call to make.

So… How Big Does Your Pension Pot Need To Be?

Let’s add all that up. Starting with 4% invested largely in US funds, we add 0.6% to recognise we spend less when we’re over 80, we add 0.5% because we’ve sacked off bonds, we add 0.4% for having a quarter allocation to small-cap funds, and we add 1% in exchange for a 13% chance of course-correction.

That’s 6.5% total; or £6,800 from the average £105,000 pension pot. Still not enough! But triple what you’d get with an annuity (£1,900); or double the 3.1% UK unadjusted withdrawal rate (£3,300).

Here’s how big your pension pot needs to be under each approach to give you just £12,500 per year:

  • Annuity @1.8% = £694,000 Pot
  • UK Standard SWR @3.1% = £403,000 Pot
  • US Adjusted SWR @6.5% = £192,000 Pot

The average 55-65 year old therefore has about half as much saved up as they actually need for a basic retirement using the highest risk approach – and nowhere near the amount needed to use a low risk annuity.

Should You Use Such A High Withdrawal Rate?

History tells us that this works, and the rates are designed to protect you from the worst-case scenario.

But you also have to be able to sleep easy at night. So maybe somewhere between 4% and 6.5% then, depending on your attitude to risk.

Ideally though, and what we plan to do, is build up such a large pot that you don’t need to withdraw anywhere near 4% and still live very comfortably. This only happens by hustling now.

Building The Pot

Hopefully this study highlights the dangers of neglecting to build a sufficiently big pension portfolio.

And it’s important to have visibility over it so you can make sure your future is being managed properly.

We’ve both consolidated our old work pensions into SIPPs for just this reason. Left unchecked, they could otherwise be poorly managed by workplace pension providers as we proved in this video:

YouTube Video > > >

By using a single SIPP to consolidate your old pensions, you can tailor your growing retirement fund to your risk profile, reduce your ongoing fees, and have oversight of the total balance – so you can easily check if you’re on track.

We looked at the Nutmeg SIPP in that video, and we think it’s one of the best for a set-and-forget strategy. You set the direction, and they do the rest.

We’ve arranged for you the first 6 months without fees when you open your SIPP through the link on the Offers page. Check it out and see if it’s the right SIPP for you!

How big is your pension pot? Is it going to be enough? Let us know in the comments below!

Check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday: