We’re often told to save for retirement, but compared to investing in UK shares, this may secretly be bad advice.
Even with interest rates still elevated, no risk-free savings account has matched the performance of the stock market in 2025.
Fun fact: the FTSE 100 has delivered close to a 21% total gain since the start of the year, compared to the roughly 5% that some of the most generous savings accounts have offered.
Now that interest rates are steadily falling, savings accounts are becoming even less attractive as a retirement building vehicle. And that’s only being compounded by tax hikes on interest and an incoming slash to the Cash ISA allowance in 2027.
So with that in mind, let’s explore some simple strategies for building more retirement wealth by investing in UK shares.
Investing vs saving
Having some cash savings is always a good idea. Apart from providing easy access to money when needed, it can serve as a handy emergency fund when an unexpected spanner’s thrown into the works. But sitting on a large cash pile over the long run can be quite detrimental.
Let me demonstrate. Over the last 10 years, the average interest rate earned on savings has been close to 2%. Don’t forget, prior to 2022, interest rates essentially hovered near zero. By comparison, the FTSE 100 has generated an average annualised return of 8.6% over the same period.
In terms of money, that’s the difference between turning £1,000 into £1,221.20 or £2,355.92 – 93% more wealth. And that’s despite the stock market suffering through a major crash in 2020, followed by a painful correction in 2022.
Understanding risk vs reward
Savings accounts have one massive advantage over investments. They’re basically risk-free. Even if a bank goes under, up to £120,000 is protected by the Financial Services Compensation Scheme.
The same isn’t true for investments. And by investing in low-quality stocks at bad prices, retirement wealth could actually be destroyed rather than created.
Instead, investors need to find high-quality businesses trading at attractive prices. And one stock on my radar that I think fits that bill is Melrose Industries (LSE:MRO).
As a quick introduction, Melrose is an aerospace & defence enterprise that designs and manufacturers critical components for aircraft and engines.
Its technology can be found on board close to 70% of all civil aircraft around the world. And right now, the business is thriving on the back of multiple major tailwinds. This includes:
- Record order backlogs for civil aerospace aircraft.
- Massive ramp-up in defence spending across Europe and the UK.
- Rising aircraft flight hours driving up demand for maintenance and spare/replacement parts.
Yet despite this momentum, the share price remains significantly undervalued versus the accelerating double-digit revenue and profit growth being delivered.
To be fair, this performance is currently being somewhat hidden by complex accounting relating to a nearly completed multi-year restructuring programme. And with the group’s CFO recently announcing his retirement, there are valid concerns surrounding continued execution.
Nevertheless, with most investors massively underestimating Melrose’s long-term potential, I feel it’s an opportunity worth exploring further. That’s why I’ve already bought shares. And there are several other UK shares I’ve added to my retirement portfolio recently.
