Forget the State Pension, here’s how I want to plan my retirement

The UK State Pension can give us a start to retirement, and it’s a nice thing to have. But the more we can add to it, the better, right?

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It’s easy to knock the State Pension, but I don’t want to do that. In fact, I consider myself lucky to live in a country that offers one at all.

But we want a bit of comfort when we retire, don’t we? So it makes sense to put away a bit more cash during our working lies.

That might mean paying extra into company pensions. Or putting cash in a Self-Invested Person Pension (SIPP) or an Individual Savings Account (ISA).

I choose shares

SIPPs and ISAs have different benefits, but I like one thing about them both. We can use them to hold shares in great British companies — and that’s my long-term choice.

I won’t try to make the case for buying shares here. Well, other than to point out that the UK stock market has beaten other forms of investment for more than a century.

It’s a choice individuals must make for themselves, based on their own needs, approach to risk, and all sorts of personal things.

Today, I just want to look at one question we often hear asked.

Drawing the cash?

It’s all very well going on about investing for the long term, for the decades ahead. And ignoring what happens in the short term. But we don’t live forever, and one day we’ll want to take the cash, right? So how do we do that?

Again, we’ll all have our own preferred strategy for drawing down retirement cash. And I can’t tell you what to do. But I can tell you the way I plan to approach it.

Firstly, I invest mostly in dividend stocks, so in a way that can make it bit easier as they already pay income.

So maybe all I need to do is stop buying new shares with my dividends, and just take the cash instead.

Lowering risk

But I’d still face risk. And when I’m relying on the cash for short-term spending, that’s not good.

Imagine I’d retired in 2019, and held bank stocks (which I do). And they all had to stop their dividends in the pandemic. Eek!

I plan to reduce my risk in two steps.

First is to move my cash to investment trusts. The closer I get to when I want to stop work, the more I’ll move.


I already bought some City of London Investment Trust shares. It holds Shell, Unilever, BAE Systems… and a lot more FTSE 100 dividend stocks.

It’s lifted its dividends for 57 years in a row. And it’s currently on a yield of about 5.2%.

So I get diversification and a dividend track record in one. And I’ll move more and more of my money to trusts like this as the years pass.

Keep some cash

That’s still no guarantee that I won’t suffer future dividend cuts. So I intend to sell enough shares to keep at least a few months of income in cash, to provide a backup.

I’m not sure how much safety in cash I’ll go for. That will depend on how much I have when the time comes.

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.

Alan Oscroft has positions in City Of London Investment Trust Plc. The Motley Fool UK has recommended BAE Systems and Unilever Plc. 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.

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