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Age 45 and no pension? Here’s how to generate £30,000 a year

It’s never too late to start saving for your retirement. Doing something is always better than doing nothing at all.

Never too late

Late starters might be surprised to discover how much of a pension they can build. For example, at age 45 you can still generate annual income of £30,000 a year, on top of your State Pension. If you’ve maxed out your company pension, one of the best ways to do this is by saving inside a Stocks and Shares ISA, as your money will be free of income tax and capital gains tax for as long as you live. You don’t even have to declare ISAs on your self-assessment tax return, if you complete one.

This year’s ISA deadline is only days away (midnight on Friday 5 April), after which you will have lost your 2018/19 allowance for good. You’ve wasted enough time – don’t waste anymore.

Take the yield

To generate tax-free retirement income of £30,000 from an ISA you will need to build a pension pot of £750,000, according to new figures from online platform AJ Bell. That’s a lot of money, but the beauty is you can generate that level of income without ever eating into your capital.

If you build a portfolio of high-yielding stocks and funds with an average yield of 4%, then that will generate your £30,000 income. Your capital can stay where it is. It may prove handy for covering major one-off expenses, otherwise you can pass it on to your loved ones when you go.

Sounds good? Then get saving. Even if you don’t hit that £750,000, smaller amounts will also make your retirement better. For example, a £500,000 nest egg could generate £20,000 a year, while £250,000 could generate £10,000.

This table shows how much you will generate if you invest your full £20,000 ISA allowance over the next decade or two, and it grows at an average rate of 5% a year.

Years invested

Total amount

Annual income










The drawback, as you may have noticed, is that you need to use your full £20,000 ISA allowance, and that’s beyond many people’s pockets. If you can’t manage that much, don’t feel bad, just save all you possibly can, for as long as you can.

If you already have other sources of retirement earnings, such as pensions and existing ISA holdings, that will make the job easier.

Invest in shares

The next question is where to invest your retirement savings? With the average easy access cash Isa paying a meagre 0.88%, you have to take the added risk of investing in stocks and shares. This is where the Fool comes in. The site is packed with individual stock and investment fund tips, aimed at people in exactly your position.

For example, if you’re in your 50s, these two broadly diversified, relatively low risk investment trusts could help you build up your wealth while you are working, then generate an income in retirement. They have low charges and yield more than 4.5% a year.

Alternatively, you could try these two investment trusts which, again, spread your money across dozens of different companies. So when should you start? As ever, the best time is today. Followed by tomorrow, the next day, and the day after that too.

Five Income Stocks For Retirement

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.