Ten years left to retirement? How to supercharge your pension -By Kyle Caldwell

We outline five steps to give your pension pot a boost

"I would like to give up work in 10 years’ time but my pension is likely to fall short of what I need for retirement.” This is a predicament a huge number of savers find themselves in.

But it is not too late to make changes so that your pension will be enough to retire on in 10 years’ time.

Here are five steps that could turbo-charge your savings.

1. The basics

First work out how much money you will need to retire on, taking into account all of your likely income and outgoings when you give up work.

Once you have a shortfall figure the next step is to increase your pension contributions as much as you can . If you have a company pension, make sure you take full advantage of any “contribution matching” by your employer. This can be 10pc-15pc of your salary.
But putting more money into the pension is only half the story. We’ll now look at your options when it comes to investing it.

2. Put some money into ultra-safe funds

Many financial advisers, including Alistair Cunningham of Wingate Financial Planning, say pensioners should still consider buying an annuity with some of their pension savings, despite the end of compulsion and the fact that annuity rates are currently poor. This is because nothing else can guarantee an income to cover essential spending.
Anyone who adopts this approach will have to sell some of the investments in their pension pot when they retire. To avoid crystallising a loss – if, for example, the markets fell sharply just before you retired – this part of your pension should be invested more conservatively.


Some funds are run in an extremely cautious manner with the aim of preserving capital if stock markets fall. Two that are regularly tipped are Personal Assets Trust and the Ruffer Investment Company.
Darius McDermott of Chelsea Financial Services, the fund shop, tipped the Newton Real Return fund, which has produced a positive return every year since 1998.
Another approach is to gradually switch to safer assets as retirement approaches. “With five years to go, a split of 75pc in bonds and 25pc in cash is appropriate to protect capital,” Mr Cunningham said.

3. Buy growth funds now and switch to income funds at retirement

Where should you invest the rest of your pension to maximise growth? Historically, the stock market has offered the best returns, although there is always the risk of falls. So some advisers recommend a mix of shares and bonds, with perhaps 60pc in the stock market.
Global funds, thanks to the diversification they offer, should make up the bulk of your exposure to shares. Favoured funds include Fundsmith Equity, managed by Terry Smith. If you prefer tracker funds, the Vanguard FTSE Developed World ex-UK Equity is the cheapest option, charging 0.15pc a year.

This approach will require you to switch funds at or before retirement. But if you plan to make the switch into income funds the day you quit work, your growth funds will be exposed to the risk of a crash as retirement approaches. So you may want to make a gradual switch to income-producing funds.
Philippa Gee (right), of Philippa Gee Wealth Management, said: “Normally with 10 years to go pen­sion savers are encouraged to take risk off the table . But for those who do not have enough money, 10 years is enough time to ride out the peaks and troughs of stock markets.
“At retirement, however, pension savers will want to switch into some income investments, and with bonds offering little value, UK income or global income funds are the preferred options.”

4. Buy income funds now and stick with them after retirement

Many investment experts say income-producing assets are best for growth, with income simply reinvested. When you retire, you can start taking the income instead.
Savers who choose this option will not have to sell their funds at retirement and should not worry too much about the ups and downs of the stock market as long as the income is maintained.


Brian Dennehy, of Fundexpert.co.uk, the fund shop, favours this approach. He said bond funds, popular with savers looking for a reliable income, should be avoided at the moment. Bonds had enjoyed a “good run”, he said, but had now become so expensive that they did not provide income with inflation protection.
Instead he favours funds that own dividend-paying shares, tipping JO Hambro UK Equity Income and Schroder Income.
“If UK and global income funds are going to be the mainstay of your income generation then why not start investing into them now and reinvest the income?” Mr Dennehy said. “History shows that this strategy outperforms the stock market 85pc of the time over 10-year periods back to 1900.”


Ms Gee agreed that bonds looked “expensive” but said a conservative saver might want 20pc or 30pc of their portfolio in bond funds. Popular choices are Jupiter Strategic Bond and Henderson Strategic Bond.
Many investment trusts have excellent track records of growing dividends each year. Some, such as City of London, Alliance Trust, Bankers, Caledonia and Foreign & Colonial, have increased dividends for more than 40 consecutive years.

5. Review your investments regularly

It is essential to keep on top of your pension investments and review them regularly. Ms Gee recommended doing so at least “twice a year”.
Bonds may look a bad buy today but in five or 10 years’ time could once again be the best option for savers who want reliable income, for example.
Regular reviews will also help ensure that your pension does not become too exposed to a particular investment that has performed well.

Culled from Telegraph