Only 17% of Brits are making this smart retirement savings move

More than 80% of the population could be making a huge retirement savings mistake, according to Edward Sheldon.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

UK savings statistics never cease to amaze me. For example, in the 2016/17 financial year, just 11.1m Britons contributed to an ISA, according to an HMRC report. Now, the UK has a population of around 66m people, so that means that, during that financial year, just 17% of the population — less than one in five people — subscribed to an ISA.

That’s a worrying statistic. It’s clear to me that the savings message isn’t sinking in.

Excuses, excuses

Of course, plenty of people have valid excuses. Some already have adequate retirement savings in their ISAs. So, there’s no need for them to contribute more. Others have built up significant balances in their workplace pensions or SIPPs. So ISA savings may not be needed by them either.

Yet for others, some excuses are very questionable indeed. “I can’t afford to save” is one line that the non-savers trot out regularly. “I’ll rely on the State pension” is another popular attitude among non-savers. “I’m too young to save for retirement” is a third excuse that we often hear.

Make no mistake, rolling out these kinds of excuses is a dangerous game when it comes to saving for retirement. People using these excuses may receive a nasty shock when they reach retirement age. For example, the State pension is currently just £164 per week. And that’s if you actually qualify for it. Could you live on that alone?

Take control of your future

If you plan to enjoy a comfortable retirement, contributing to an ISA on a regular basis is a very sensible strategy. Here’s why.

For starters, regular savings add up over time. Even just saving £20 per week can make a difference over the long run. Saving and investing money on a regular basis is one of the most effective ways of building long-term wealth. Putting a little bit aside every month into an ISA could have a huge impact on your quality of life in retirement.

Second, ISAs are tax-free. That means that any interest or capital gains that you make within your account are yours to keep. You won’t need to hand over a slice of your gains to the taxman. That’s an underrated benefit. Paying no tax on your investment gains can boost your wealth significantly, over the long term.

Third, by contributing to a Stocks & Shares ISA or a Lifetime ISA you could take advantage of the vast range of fantastic investment products that are available to UK investors. For example, Terry Smith’s Fundsmith Equity fund has returned nearly 90% over the last three years alone. Are you capitalising on these kinds of opportunities?

For UK investors, ISAs (the two types I mentioned, not the cash variety) remain among the best products for long-term saving and investing. If you plan to enjoy a comfortable retirement, it’s probably a smart move to contribute to one on a regular basis.

Of course, there are plenty of other things you can do to maximise your retirement wealth. For more wealth-building tips, check out the free report below. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »