I’ve stepped up investing in UK shares over the past decade as my concerns over the State Pension have grown. Fresh research by Hargreaves Lansdown indicate that I’m not alone in worrying about how I’ll be able to fund my lifestyle in retirement.
The financial services firm reports that almost one in five (18%) of 2,000 people it surveyed “don’t believe the State Pension will exist when they retire.” A further 26% said they were unsure, while 57% reckon it will still be around by the time they retire.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says that “the constant merry go round of change” has led to speculation that the State Pension (which she describes as “the backbone of our retirement income“) is endangered.
Morrissey notes that longer lifespans are pushing up the costs of funding our older generation. She also notes that the ‘triple lock’ mechanism will see the State Pension rise an additional 8.5% from next April, pushing costs even higher.
She says that the government could tinker with the lock to limit future rises. This mechanism ensures that the benefits rises in line with average earnings growth, inflation (as per the consumer prices index), or by 2.5%, whichever is highest.
Alternatively, ministers can consider raising the State Pension age, Morrissey notes. In fact, she predicts that this issue “will be revisited in future.”
Neither of these issues seem especially attractive to me. So I’m investing in UK shares to take control of my financial destiny.
Investing in British stocks has shown to generate the sort of returns that could help me retire in comfort. According to IG Group, the FTSE 100 delivered an average annual return of 7.48% between its inception in the mid-1980s and 2022.
By investing regularly, this sort of performance could help me retire comfortably whatever happens to the State Pension. It’s my plan to turn the state benefit into a nice little bonus for me, rather than the determinant of whether or not I struggle to make ends meet.
Past performance is no reliable indicator of the future, of course. But if the UK’s leading share index continues to deliver that 7.48% return over the next 20 years, a £500 monthly investment in FTSE shares would give me a healthy £618,146 to retire on.
Here’s what I’m doing now
In fact I’ve stepped up investing in UK shares in 2023 to help me meet my goals. Market volatility means many top British stocks are trading at rock-bottom prices. This gives me a chance to make an even-greater return than that 7.48% yearly average by buying low and eventually selling much higher.
Rental equipment supplier Ashtead Group, drinks maker Diageo, and financial services businesses Aviva and Legal & General are just a handful of shares I’ve bought ‘on the dip’ this year. And there are more unloved FTSE 100 and FTSE 250 shares that I plan to buy in the months ahead.