According to Moneyfacts, the average annual return of a Cash ISA since 2010 is 1.79%. Compared to the 6.79% that the investing ISA has delivered, the gap in potential wealth over time is staggering.

The tragedy to me is that the modern investor has many options to generate wealth without taking excessive risk. Want to see how I’m building a serious nest egg for retirement?

Double trouble

My plan doesn’t involve sticking all of my money into the stock market. Like many Britons, I love the Cash ISA, with its enormous tax benefits and reliable return.

But the majority of my extra cash each month is put in shares, trusts and funds. That 5% difference each year between cash savings and the Stocks and Shares ISA can add up to hundreds of thousands of pounds over a lifetime.

It’s not just the risk that I’m losing out on better returns elsewhere that drives me either. Inflation means my money may be losing value in real terms if locked in a low-yielding product.

This has been the case since 2010 when inflation has averaged 2.92%, above the 1.79% Cash ISA return. In other words, cash has been a losing asset class.

A £500k+ nest egg

Let’s check how these returns could shape someone’s savings stash for retirement. With £500 a month put into a Cash ISA, I’d make £238,050 after 30 years, if the average annual return since 2010 stays the same. Would that likely be enough money for me to live comfortably in retirement? I have my doubts.

Conversely, if I put that £500 a month into a Stocks and Shares ISA instead, I’d have £585,303 for retirement. That’s a staggering difference of almost £350,000.

I’m not suggesting that investors put all their money in the stock market. That’s far too risky, even for someone who loves share investing like myself. An 80-20 split between the investing and savings account is one popular strategy I’m a fan of. With this method, I could have an impressive £515,852 to retire on if all goes well.

Investing wisely

Not everyone reading this will still be comfortable with the idea of investing. So let me talk about the benefit of considering exchange-traded funds (ETFs) like the Xtrackers World Momentum ETF (LSE:XDEM).

I love these products because they balance risk and reward extremely effectively. This particular one (which I own) holds shares in 350 global companies, ranging from US tech shares (Nvidia) and UK banks (HSBC), to Japanese games companies (Nintendo) and Canadian miners (Kinross Gold).

This diversified portfolio provides a smooth return over time, and protects investors from weakness in specific sectors and regions. Delivering an average yearly return of 14.2% since late 2015, it’s certainly been an excellent investment for me.

Like any shares-based fund, it can go up and down according to stock market conditions. But over the long term, equities markets have a knack of moving substantially higher. Those who invest in an ISA instead of saving can build significant wealth in the process.

The post Not using a Stocks and Shares ISA? You could be missing out on a wealthy retirement! appeared first on The Motley Fool UK.

Yet recent history provides a useful guide to what can be achieved with one. According to Moneyfacts, the average investing ISA’s provided a typical annual return of 9.64% since 2015.

This kind of brilliant return would have turned even a modest regular investment into a tasty pile of cash. Indeed, if someone had put £100 into a Stocks and Shares ISA every month over that period they’d have doubled their money (to £20,067).

Want to know how much they could have made by retirement? That’s trickier, but it’s possible to make a rough calculation. Let me show you why.

Here’s your answer

Albert Einstein once called compound interest “the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.“

Cool story, I hear you say. What does this have to do with our wealth-creating exercise?

Put simply, time is an investor’s best friend. The longer they have their money in the stock market, the more each pound multiplies into something far bigger.

When figuring out how much £100 a month could become by retirement, then, we need to consider how long that investment is made over.

Let’s say we have a 40-year old just starting their investing journey. Here’s how much they’d have in their ISA by the time they reached 55, 60, 65 and 70, based on the long-term average return:

Building retirement income

Those are pretty decent returns for just £100 a month, I think. If our investor decided to start drawing down 4% of their portfolio each year at age 70, they’d have a second income of £8,376 on top of the State Pension.

If you’re like me, though, you’ll also look at this and be thinking: could I live off this amount in retirement?

I’m not sure I personally could. This is why being able to increase deposits over time is another essential part of the ISA-building process.

Someone who raised their annual contributions by 5% a year would have £333,540 after 30 years, and a £13,342 non-State Pension income. A 7% rise would give them a £441,294 nest egg, and a £17,651 additional income.

Targeting ISA wealth

None of this is guaranteed, of course. But with a wealth of shares, trusts and funds to choose from, returns like this remain very achievable, in my view.

I personally like the idea of investing in exchange-traded funds (ETFs) like the Xtrackers World Momentum ETF (LSE:XDEM). Indeed, this is a fund I hold in my own portfolio.

By investing in hundreds of global companies (350 in total), it protects returns from turbulence among particular stocks, sectors and regions. This reduces risk and can provide a smooth return over time.

A focus on equities leaves the fund vulnerable to stock market downturns. But then it also allows investors to profit from potential recoveries, generating enormous wealth over the long term.

The Xtracker World Momentum’s 13.6% average return since 2015 illustrates this principle in action. Funds like this can provide a simple and effective way to build a Stocks and Shares ISA for retirement wealth.

The post If a 40-year-old put £100 a month in a Stocks and Shares ISA, here’s what they could retire on appeared first on The Motley Fool UK.

These savings can be used for further investing, speeding up the compounding effect and helping investors build wealth more quickly. What’s more, retirees can draw down money without having to pay a penny to HMRC in income tax.

Finally, with a generous £20,000 annual contribution allowance, investors have plenty of scope to grow their portfolios. Only about 7% of Cash ISA and Stocks and Shares ISA holders use their whole yearly allocation.

The question is, much does one need in one of these products to target a healthy passive income for retirement?

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

A £35k income target

There’s no ones-size-fits-all answer to this. Each of us has different financial circumstances and aspirations. What might be a lavish amount for some might seem pretty modest for others.

That said, I think a £35,000 ISA income is a reasonable sum to aim for. Combined with the State Pension, that could — 30 years from now — provide a total annual income of just over £60,000.

That’s based on the current full pension of £11,973 growing at 2.5% each year — the minimum annual growth rate under the so-called Triple Lock system.*

To generate that £35,000 income from a Stocks and Shares ISA, an investor would need a retirement fund of £875,000. That’s assuming a 4% annual drawdown rate that could provide a reliable income for life.

* The Triple Lock guarantees that the State Pension grows by the rate of earnings growth, consumer price inflation (CPI), or 2.5%, whichever is highest.

Investing wisely

An £875,000 portfolio is clearly a lot of cash. To make this, an investor needs to have a sound investment strategy and commitment to making regular contributions.

But an ISA of this size is very possible, in my view. The tax breaks and the impact of compounding that I’ve described make it easier to grow wealth over time. Then there’s the powerful long-term returns that global stock investing tends to deliver.

Over recent decades, stock market investors have enjoyed an average annual return of about 8% to 10%. I feel a diversified portfolio, to spread risk and capture a range of growth and income opportunities, is critical to reaching this target.

This can be achieved by buying individual shares, or investment trusts or funds that holds baskets of different equities. Many investors (myself included) do both. One fund that I currently hold is the Xtrackers World Momentum ETF (LSE:XDEM), which has positions in roughly 350 different companies.

The fund focuses on large- and mid-cap stocks with high growth potential and strong price momentum. It’s a strategy that’s paid off handsomely — since October 2015, the ETF’s delivered an average annual return of 13.7%. This is thanks in part to its large portfolio of quality US shares like Nvidia, Visa, Palantir, and Broadcom.

It’s true that a 60% weighting of Wall Street equities creates more concentration risk than more globally diverse funds. But as we’ve seen, it can also unlock stunning gains thanks to the enduring power of the US stock market.

The post Fancy a £35,000 second income in retirement? Consider buying shares in an ISA appeared first on The Motley Fool UK.

Xtrackers MSCI World Momentum ETF

Exchange-traded funds (ETFs) like the Xtrackers MSCI World Momentum ETF (LSE:XDEM) can be a great way to target large returns while still diversifying for safety. This particular fund has delivered an average annual return of 12.5% since 2015.

I’ve topped up my holdings three times since I first opened a position last spring, including last month.

Funds with a momentum strategy like this have significant wealth-building potential. The companies they hold often enjoy strong price performance due to strong fundamentals: these can include robust operational performances and market opportunities that deliver strong sales and profits growth.

This particular Xtrackers fund focuses on “large and mid-cap companies from global developed markets with high momentum scores“. In total, it holds shares in 360-plus global companies spanning an array of regions and sectors, allowing me to further spread risk across my SIPP.

Major holdings here include US shares Broadcom and Netflix, Germany’s Rheinmetall, and the UK’s Rolls-Royce.

Concentrating on momentum stocks relies on upward trends continuing. It also means that when investor confidence weakens, they can fall more sharply than the broader stock market.

That said, I think the benefits from this strategy can more than compensate for such volatility, as this Xtrackers momentum fund’s performance since 2015 shows. Remember, though, that past performance isn’t always a reliable guide to future returns.

Aviva

The returns delivered by FTSE 100 share Aviva (LSE:AV.) haven’t been nearly as impressive.

Some chunky dividends have offset a 10-year share price decline and resulted in a positive total return. But at 2.7%, the total average annual return lags the Footsie average of 7% by some distance.

Having said that, I’m confident the company’s more-recent self-help measures, like the rebuilding of the balance sheet and sale of non-core assets, mean Aviva shares should outperform looking ahead. The business now has considerable strength to grow earnings through acquisitions, like that of Direct Line, which is currently going through. It also has the means to reward shareholders with share buybacks and more market-beating dividends.

Aviva sells a variety of financial services products. These include life insurance policies, pensions, annuities, and wealth management. As a result, it has many opportunities to turbocharge earnings growth as populations in its UK, Irish, and Canadian markets rapidly age.

The downside is that the products it sells are highly cyclical. So in times of weak economic growth and high interest rates, sales can struggle. Yet, I’m prepared to weather such discomfort given the company’s excellent long-term potential.

Besides, I believe the excellent value Aviva’s shares offered when I bought in this month was too good to ignore. Its price-to-earnings-to-growth (PEG) ratio sits at 0.1 for this year, and remains below the value watermark of 1 for 2026 and 2027. And its dividend yield ranges from 6% to 7% for the next three years.

The post 2 top SIPP buys I made in July: a FTSE 100 share and a global ETF appeared first on The Motley Fool UK.

We may not know the changes for several months, but restricting the Cash ISA allowance to £4,000 is one much-discussed change urged by City analysts.

I’m a firm believer in the importance of holding cash on account. I do it. But I don’t believe there’s a reason for savers to panic ahead of any potential changes. A recent report from UK-based investment management company Charles Stanley on changes to the ISA regime underline why.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Reasons NOT to be fearful

According to its chief investment analyst Rob Morgan, there are five reasons why users of these cash products shouldn’t worry:

1. The Cash ISA is unlikely to totally disappear, with the government pledging to “get the balance right between cash and equities to earn better returns for savers, boost the culture of retail investment, and support the growth mission.”

2. Cash savers already enjoy a tax-free savings allowance of £1,000 outside the ISA.

3. People can transfer funds in a Stocks and Shares ISA into a Cash ISA, a rule that (if sustained) could see individuals circumvent reduced allowances on cash products.

4. Individuals can also access low-risk options outside a Cash ISA, such as money market funds and short-dated government bonds.

5. Cash accounts “may not be a good home for long-term money.”

Morgan notes that someone who invested £100 a month into a Cash ISA would have £38,493. By comparison, a Stocks and Shares ISA investor who put that into global shares instead would now be sitting on £160,849.

Here’s what I’m doing

I’ll plan to continue saving in a Cash ISA even if current rules are shaken up. They provide me with a place to hold emergency cash tax-free. They also allow me to diversify my portfolio.

But, as I’ve already been doing, I’ll continue using the majority of my surplus money each month to buy shares, trusts and funds in my Stocks and Shares ISA and my Self-Invested Personal Pension (SIPP).

One fund I currently hold is the Xtrackers MSCI World Momentum ETF (LSE:XDEM). It’s a financial vehicle I think is worth nervous Cash ISA savers considering if they’re thinking about some alternative investments.

This exchange-traded fund (ETF) has holdings in large- and mid-cap companies “with high momentum scores“, providing the possibility for long-term capital growth while reducing the danger to investors’ capital.

In total, the fund has positions in 350 different shares from across the globe and spanning many sectors, making it an effective way to limit risk. These include household names from the UK such as Rolls-Royce, Unilever and Barclays.

The vast majority (73.8%) of the fund is tied up in US shares, which is more regional risk than ETFs with a more globally diversified allocation. But it also means it’s packed with heavyweight growth stocks including Nvidia and Apple that could deliver stunning returns.

Over the last decade, this Xtrackers product has delivered an average annual return of 11.6%. That towers above the corresponding average of 1.21% that Cash ISAs have provided, and underlines the wisdom of investing in UK and overseas shares.

The post As Cash ISA changes approach, is now the time to buy UK shares for long-term wealth? appeared first on The Motley Fool UK.

Like most people, I deposit some money in a savings account to provide a guaranteed return and give me funds for a rainy day. However, putting too much in a low-yielding cash product can also be high risk for those like me who are targeting a comfortable retirement.

Here’s why.

Cash returns

Today the best-paying, easy-access Cash ISA offers a 5.1% interest rate. That’s not bad, and certainly in the context of the poor rates that savers endured during the 2010s.

But parking all or most of one’s cash here could — depending on our investment goals — be a serious mistake.

On average, Brits currently save approximately £105.43 per month, according to personal finance website Finder. They also have £17,773 set aside in savings.

If someone parked this in a 5.1%-yielding Cash ISA, after 30 years they’d have £171,199 sitting in their account, excluding fees. If they then drew down 4% of this a year, they’d have an annual passive income of just £6,848, excluding the State Pension.

Given the rising cost of living and social care, it’s unlikely this will be enough to retire comfortably on. And what’s more, securing a 5.1% savings rate for the next three decades may be a tall order, depending on future interest rates.

A £17k+ passive income

Past performance is not a reliable guide to the future. However, the superior long-term returns of share investing since the mid-20th century suggest this could be a better option to consider to build wealth.

Let’s say an investor put £20 a month in that 5.1% Cash ISA, and the remaining £85.43 in a diversified mix of stocks, funds, and trusts in a Stocks and Shares ISA.

Based on a reasonable average annual return of 9%, and assuming that £17,773 of savings is also invested in the stock market, this investor could make £435,162 after 30 years.

A 4% drawdown in this situation would then provide an annual passive income of £17,406. These figures exclude broker fees.

A top trust

There’s no one answer to how much we’ll need to retire comfortably. This is highly subjective, while the future cost of living is also tough to predict.

But prioritising investing over saving can significantly improve one’s chances of building a decent nest egg. And one way to consider to achieve this is by investing in a fund.

The Xtrackers MSCI World Momentum ETF (LSE:XDEM), for instance, is a fund I’ve bought for my own portfolio. While it can go up and down in value according to economic conditions, its holdings in around 350 companies allows investors like me to spread risk while also targeting a large return.

Just under a quarter of the fund is sunk into high-growth information technology stocks like Nvidia and Apple. It also provides weighty exposure to the telecoms, financials, consumer goods, and industrials segments, reducing its dependence on one sector.

Since its launch in autumn 2014, this exchange-traded fund (ETF) has served up an average annual return of 11.52%. That’s higher than the 9% average that I mentioned above. If the fund continues to achieve a higher return, it would allow an investor to build a larger nest egg over time.

The post A top investment trust to consider for a possible £17k+ second income EVERY YEAR! appeared first on The Motley Fool UK.

Here’s my three-point strategy that could turn a £30,000 lump sum investment today into an annual passive income of nearly £55k.

1. Use a SIPP

Firstly, it’s worth considering opening an investment account that reduces or eliminates wealth-reducing tax liabilities. This can save individuals thousands of pounds each year they can invest to make even greater compound returns.

In the UK, both the Individual Savings Account (ISA) and the Self-Invested Personal Pension (SIPP) serve this purpose. Users of these products don’t pay a penny in capital gains tax or dividend tax.

For someone looking to invest a big amount like £30k, they might want to think about parking that in a SIPP.* As well as providing big tax savings, these pension products give users extra money to invest thanks to tax relief.

Let’s say this investor is a basic-rate taxpayer. After depositing £30k, they’d receive a 20% government ‘top-up’ which would be paid into their account within 10 weeks.

So in effect, they’d have £36,000 to start growing their retirement pot.

* The annual SIPP allowance is £60,000 or a sum equivalent to annual earnings, whichever is lower.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

2. Balance risk and reward

Investing in exchange-traded assets is riskier than holding one’s money in cash. However, for many people, the pull of substantially higher rewards makes this extra risk a worthwhile endeavour.

Individuals can still effectively tailor the amount of risk they’re prepared to take on, too, according to how they fill and structure their portfolio.

A SIPP user can hold a certain proportion of their investment in cash if they choose. They can also purchase a diversified selection of shares and other assets to balance their exposure.

Trusts like the Xtrackers MSCI World Momentum ETF (LSE:XDEM) can be an effective way to achieve this. This particular exchange-traded fund (ETF) has holdings in approximately 360 companies across the world and spanning multiple sectors.

Major holdings range from Nvidia and Walmart, through to Berkshire Hathaway and JP Morgan Chase.

With a focus on momentum shares, it has the potential to deliver market-beating capital gains. However, a high weighting of US shares (approximately 76% of the ETF) also means it may carry more risk than a more globally diverse fund.

Encouragingly the fund has an excellent long-term track record, delivering an average annual return of 12% since early 2015. If this continues, a £36k investment today would — after 30 years — become a terrific £1,294,187.

3. Buy high-yield dividend shares

There are multiple ways that investors can then try and turn this into a passive income in retirement.

They could purchase an annuity with it. Alternatively, they could draw down 4% of it a year, which would provide a second income for around three decades.

Another option to consider would be to purchase high-yielding dividend stocks. For example, investing that £1m portfolio in high-yield dividend stocks with an average yield of 5% could generate an annual passive income of approximately £64,709.

And with this method, an investor gives their portfolio further scope to grow over time.

The post £30k to invest? Here’s one way to target a near-£65k second income in retirement appeared first on The Motley Fool UK.

1. Use an ISA and/or a SIPP

The first thing to think about is opening an Individual Savings Account (ISA). Both the Stocks a Shares ISA and Lifetime ISA allow investors to buy shares, funds, and trusts.

Investors should also think about opening a Self-Invested Personal Pension (SIPP), a product that allows access to these asset classes as well.

These three products have different rules concerning withdrawals and annual allowances. But each is worth serious consideration given that users don’t pay a penny in capital gains tax or dividend tax. Over time, this can add up to serious money.

What’s more, with Lifetime ISAs and SIPPs, the government effectively gives savers and investors money through tax relief. This provides savers and investors with additional resources for compounding wealth in the long run.

2. Choose wisely

There are literally tens of thousands of assets investors can choose from today. While overwhelming, such a broad selection offers a wealth of opportunity.

Each one of us has different financial goals, investing styles, and tolerance of risk. So there’s no blueprint as to what the perfect portfolio will be.

One good idea is to observe what other successful investors have been buying and selling. I’m a keen watcher of what ‘Sage of Omaha’ Warren Buffett‘s been trading with his Berkshire Hathaway investment firm. Given his $100bn+ fortune, his trading activity’s always worth paying attention to.

But regardless of what others are doing, what stock tips you may read, or what market trends look white hot, it’s critical that you do your own research before buying and selling any asset. Even the likes of Buffett get it wrong. So pore over trading statements, balance sheets, industry reports, and other material yourself.

3. Build a diversified portfolio

While the specific assets we buy can differ markedly, building a diversified portfolio is a critical strategy every investor should consider.

Doing this can help reduce risk and provide a stable return across the economic cycle. It also means investors get exposure to a myriad of opportunities that can supercharge their portfolios.

This year I’ve bought an wide array of growth, dividend, and value shares like baker Greggs, insurer Aviva, drinks bottler Coca-Cola CCH, and building materials supplier CRH. I’ve also purchased exchange-traded funds (ETFs) like the Xtrackers MSCI World Momentum ETF (LSE:XDEM).

As its name implies, this fund invests in a range of global equities, 350 in total, with cash spread across large- and mid-cap companies. Big holdings here include tech stocks Apple and Nvidia, although other sectors like industrials, financials, and telecoms are well represented, providing decent diversification.

Its focus on momentum shares can be a risk, because these stocks are typically priced based on recent strong performance, which may not be sustainable. But its collection of established heavyweight names helps soothe any fears I have.

So does the fund’s robust returns, which since 2014 have averaged 11.7%. Based on this performance, a £400 monthly investment here could generate £712,701 after 25 years. This would then create an annual passive income of £28,508 based on a 4% drawdown rate.

The post Consider these 3 steps in 2025 to target a winning second income! appeared first on The Motley Fool UK.

I think so. And fresh research from Janus Henderson Investment Trusts supports that view. It shows that cash savings “returned less than a third of that returned by stocks and shares” in the nine months to September.

It means that Britons have literally missed out on tens of billions of pounds.

A £165bn black hole

According to Janus Henderson, savers earned £58.6bn worth of interest between January and September, equivalent to an average interest rate of 2.93%.

By comparison, the FTSE All-Share Index returned 9.9% through a blend of capital gains and dividend income. Meanwhile, the MSCI World Index provided an even-higher return of 13.4%.

The result in real terms is jaw-dropping. Using Janus Henderson’s calculations, “savers have missed out on £165bn of returns… by comparing cash interest and the return on global equities.”

The report adds that “savers have missed out on £110bn of returns this year compared to investing in UK equities.” Both calculations even allow for three months’ household income being held in a savings account.

Long-term trend

This stunning difference isn’t just a temporary development either. And it’s even more depressing for cash savers when we factor in the eroding impact of inflation.

Janus Henderson says that “£100 saved in cash has lagged behind rising prices by 3.4% over the last 30 years, meaning it buys less today, even with all the interest income earned since, than it did in 1994.”

Conversely, that £100 invested in global shares would have beaten inflation almost seven-fold, or four-fold if spent on UK shares.

A top fund

Past performance is no guarantee of future success. But the resilience and wealth-creating power of the stock market is why the lion’s share of my money is tied up in shares, funds and trusts.

I only hold some money in a savings account to manage risk, and give me cash to draw on in the event of a rainy day. While this is a riskier strategy, I can take steps to reduce the danger by diversifying my holdings.

One strategy I use is to invest some of my capital in exchange-traded funds (ETFs) like the Xtrackers MSCI World Momentum UCITS ETF (LSE:XDEM).

As the name implies, this fund invests in shares from across the globe, 350 in total. And so it allows me to spread risk across a variety of regions — including the UK — as well as a multitude of sectors.

I like the decent exposure to tech stocks including Nvidia, Apple and Meta. This gives me an opportunity to profit from fast-growing tech phenomena including artificial intelligence (AI), robotics and quantum computing. But I’m aware that shares like this could deliver disappointing returns during economic downturns.

Since 2014, this fund has delivered an average annual return of 11.9%. If this continues, a £10,000 investment today would become £348,975 after 30 years.

That’s far better than the £24,568 I could have made by parking £10k in a 3%-yielding savings account.

Shares and funds can rise and fall in price. But returns like this suggest my current strategy is the correct one for me.

The post £10,000 to invest? Here’s why saving instead of buying UK shares could cost me a fortune appeared first on The Motley Fool UK.

We all dream of putting our feet up after a lifetime of work. Unfortunately this is becoming harder to do as the cost of living and social care rise.

Indeed, fresh research shows that the size of the pension pot needed for basic retirement has soared 60% over the last three years.

Here’s what I’m doing to safeguard my retirement plans.

Up 60%!

Today, the average pension pot needed to meet basic needs in retirement stands at nearly £110,000.

According to the Living Wage Foundation, the amount required for a threadbare standard of living has jumped from £68,300 in 2020/21, to £107,800 in 2023/24.

The need for larger pension pots means many Brits are pessimistic about when they’ll be able to finally hang up their work apron.

Living Wage Foundation’s survey showed that 53% of pension savers “felt they would never be able to retire“. Furthermore, 63% of those felt they would have to work several years beyond retirement age.

No-one knows what the future holds. But with living and care costs on the increase, I think it’s important to save and invest regularly, and to try and come up with a workable investment plan.

Here’s what I’m doing now. I’m confident it’ll allow me to retire at a reasonable age and in comfort.

Two top tips

The first thing I did on my investing journey was open a tax-efficient Individual Savings Account (ISA). Since then, I’ve also opened a Self-Invested Personal Pension (SIPP).

These products have strict rules annual contributions and withdrawal timings. However, over the long term, they can save me a fortune in capital gains tax and dividend tax, thus boosting my pension pot.

The next thing I ensured was to invest in a range of assets to balance risk and reward. This is why I hold a Cash ISA as well as a Stocks and Shares ISA, Lifetime ISA, and SIPP for share, fund, and trust investing.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

A £350k pension pot

I also choose to invest most of my money in equities. Past performance is not always a reliable guide to the future. Still, share investing tends to provide far higher returns than, say, holding money in cash.

As part of this strategy, I hold shares in 10-15 companies to help me spread risk. I also have holdings in several exchange-traded funds (ETFs) including the Xtrackers MSCI World Momentum UCITS ETF (LSE:XDEM).

This fund holds shares in several UK blue-chip shares including AstraZeneca, Unilever, and British American Tobacco. But as its name suggests, it also has considerable global exposure. This gives me excellent diversification, allowing me to manage risk and capture a multitude of growth opportunities.

Since 2014, this Xtrackers fund has provided an average annual return of 11.7%. If this continues, a monthly investment of just £200 for 25 years would give me a pension pot of £356,351.

That’s more than three times the £110,000 the Living Wage Foundation says I’ll need for a basic retirement.

Its focus on US shares could see it underperform if the stateside economy begins to struggle. Yet on balance, I still think it’ll prove a great investment for me over the long term.

The post As retirement needs soar 60%, here’s how I’m building wealth with UK shares appeared first on The Motley Fool UK.