The Motley Fool

Worried about the State Pension? I’d buy UK shares in an ISA to retire in comfort

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.

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Image source: Getty Images

Investing in UK shares after the stock market crash may not seem to be a sound means of building a retirement nest egg. However, indexes such as the FTSE 100 and FTSE 250 have long track records of growth that have seen them produce annualised total returns in the high-single digits.

As such, they could provide a sound means of countering a disappointing State Pension. It amounts to just £9,110 per year. Therefore, a supplementary passive income provided by an ISA portfolio of British shares could provide greater financial freedom for retirees.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Buying UK shares after a stock market crash

The recent stock market crash has highlighted the potential for volatile performance from UK shares. However, bear markets, corrections and downturns can occur at any time. Indeed, any company can produce a disappointing performance that causes a fall in its stock price. In other words, the stock market is full of unknowns that can lead to disappointing returns and paper losses for investors over the short run.

However, in the long run, indexes such as the FTSE 100 and FTSE 250 have excellent track records of growth. They have historically outperformed other mainstream assets such as cash and bonds. Meanwhile, building a diverse portfolio of stocks is more accessible than investing in buy-to-let property. Therefore, long-term investors may be able to build a portfolio of stocks that produces a surprisingly large nest egg by the time retirement comes along. From this, a generous passive income may be drawn through a diverse range of UK shares.

Building an ISA portfolio to supplement the State Pension

An ISA portfolio of UK shares can help retirees to enjoy greater financial comfort. After all, the State Pension is unlikely to provide a sufficient income for most people. It currently amounts to around a third of the average UK salary. So it’s likely to require a supplementary passive income.

A Stocks and Shares ISA offers a convenient and cost-effective means of accessing the growth potential of the FTSE 100 and FTSE 250. An ISA can be set up online in a matter of minutes. Meanwhile, the cost of administering it is extremely low, in many cases. Moreover, retirees can withdraw as much money as they like from an ISA at any time without penalty or tax payments. This makes them a flexible means to supplement the State Pension.

Clearly, buying UK shares means higher risks than other assets such as cash and bonds. However, the long-term growth prospects of a diverse ISA portfolio of stocks could make them relatively attractive on a risk/reward basis. As such, now could be the right time for an investor to consider purchasing FTSE 100 and FTSE 250 shares. Certainly while they trade at lower prices following the stock market crash.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.