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Data from the Pensions Policy Institute showed that just 40% of British people aged between 20 and 29 were paying into a private pension in 2019. The percentage of people investing in their retirement peaks between the ages of 30 and 49, before dropping in the over 50s. Overall, 54% of men and 50% of women across all age groups are paying into a private pension.
The report also shows that, on average, 49% of a pensioner’s income is from a private pension. What these statistics suggest is that private pensions are important for topping up your income during retirement. Despite that, people don’t tend to think about creating a retirement plan until they’re approaching middle age.
Logic tells us that, the longer you wait before you start paying into a personal pension, the less you’ll have when you retire. This isn’t always true, but it’s logically sound. For example, if you open a self-invested personal pension (SIPP) and put money into the S&P 500, a stock market index with an annualized average return of 10%, the potential returns will be greater if you start in your 20s compared to your 30s. Therefore, it makes sense to start sooner rather than later. However, it also pays to look closely at the way you’re investing.
The Right Investments Need the Right Financial Product
As well as making the right investments, you need to find the right SIPP. Finance is a competitive industry and there are multiple providers for multiple products. From simple savings accounts to ISAs and SIPPs, there are options aplenty. As such, it’s possible to switch providers in the same way you do energy suppliers. However, given that these are financial products, the process requires a bit more thought.
Indeed, as a consumer looking to switch and maximise their investments, you need to fully assess your options. Doing this requires you to look at a variety of variables before you transfer your SIPP. The main examples of things you need to consider before you move your SIPP are:
- Am I paying too much in fees and commission on trades?
- Can I get a clear overview of what my pension is invested in?
- Have I got access to the investment options I want?
The point of opening a SIPP is to take control of your pension pot. That means getting access to the financial instruments you want and in the way you want. Without this, you’re not making the most of a tax-efficient pension product. Therefore, it’s important to ask yourself the types of questions listed above and consider whether or not you need to move your pension based on the answers that come back.
Once you’ve got the right SIPP account, you need to find the right investments. No investment is ever guaranteed, but the aim is to choose instruments that have long-term potential. Based on the information available, here are some of the best-performing stocks and funds over the last 10+ years.
Top Stocks from 2009 to 2019
| Company (Ticker) | Industry | Total Returns Dec 2009 to Dec 2019 |
| Netflix Inc. (NFLX) | Entertainment | 3,767% |
| MarketAxess Holdings Inc. (MKTX) | Investment Banks | 3,182% |
| Abiomed Inc.(ABMD) | Medical | 2,121% |
| TransDigm Group Inc. (TDG) | Aerospace & Defence | 2,065% |
| Broadcom Inc. (AVGO) | Semiconductors | 1,919% |
Top Funds Since 1999
| Fund | Total Returns Dec 2009 to Dec 2019 |
| Marlborough Special Situations | 3,502% |
| Schroder ISF Greater China | 1,893% |
| Threadneedle European Smaller Companies | 1,698% |
| Artemis UK Smaller Companies | 1,643% |
| BlackRock UK Smaller Companies | 1,616% |
Start Thinking About the Future Today
Past success isn’t always a reliable indicator of future gains. However, it’s an important metric to consider when you’re investing for your retirement. The above stocks and funds have all produced positive returns over a long period of time. As someone looking to build a pension pot, this isn’t something you can ignore.
Saving for retirement needs to be a gradual process. The above returns are exceptional, but they demonstrate how it can take many years for your initial investment to realise a significant profit. Therefore, it can be a good idea to start a SIPP early, so long as you choose the right investments.
