The State Pension amounts to just £9,110 per year. Therefore, it’s unlikely to provide financial freedom for most retirees. As such, building a nest egg from which to draw a passive income in older age is likely to be important for many people.
With that in mind, here are two UK shares that appear to offer long-term growth potential. Over time, they could improve your prospects of retiring in comfort from a standing start at age 50.
Reducing your reliance on the State Pension
Barratt Developments (LSE: BDEV) long-term recovery prospects could help you to build a retirement nest egg that reduces your dependency on the State Pension. The housebuilder has experienced a challenging period this year. Lockdown measures have severely disrupted its financial performance. However, recent updates suggest that it’s in a good position to deliver growth.
For example, its sales rate in the first 15 weeks of the current financial year has been in line with the same period of the previous year. This suggests that factors such as low interest rates and the stamp duty holiday are having a positive impact on the sector. The company’s solid balance sheet also means that it’s in a good position to overcome potential short-term weaknesses that may arise during a tough period for the wider economy.
Barratt’s shares appear to offer good value for money. For example, they currently trade on a price-to-earnings (P/E) ratio of just 10.3. In the short-term, their progress may be negatively impacted by economic uncertainty. However, over the long run they could catalyse a retirement portfolio that includes a range of other stocks from across the FTSE 100 and FTSE 250.
A FTSE 100 recovery stock
Associated British Foods (LSE: ABF) could also produce a long-term recovery to help you to overcome a disappointing State Pension. The company’s retail division has experienced a difficult year. Its Primark clothing and lifestyle store closures have contributed to weak sales in the 2020 calendar year.
However, this has been partly offset by encouraging performances from the company’s other segments. Divisions such as ingredients and grocery have beaten expectations in recent months. This has helped to improve the company’s overall performance.
Looking ahead, the business is forecast to post double-digit profit growth in the current financial year. Its recent updates have shown its performance has been stronger than expected. As such, its forward P/E ratio of 15.8 could signify that the stock offers good value for money relative to many of its industry peers.
Therefore, buying shares in ABF as part of a diverse portfolio could lead to a surprisingly large nest egg in the long run. This may help to assuage your concerns about the State Pension. This could lead to a more comfortable retirement from a financial perspective.
Peter Stephens owns shares of Barratt Developments. The Motley Fool UK has recommended Associated British Foods. 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.