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AJ Bell's Tom Selby answers readers' questions about retirement issues
Thursday 21 Feb 2019 Author: Daniel Coatsworth

Mike says:

‘With all the uncertainty going on at the moment I’m nervous about investing my entire pension pot in the stock market. I’m 45 and not planning to draw an income from my fund until I’m 65 – does it make sense to invest in cash in the short-term?’

Tom Selby, AJ Bell senior analyst says:

You’ve neatly encapsulated the dilemma facing many retirement investors on the back of some difficult times for the stock market.

Certainly in the last 12 months or so you could be forgiven for thinking cash is the safest option for your hard-earned retirement savings.

If you’d put £10,000 in the FTSE All-Share at the start of 2018 and reinvested all your dividends, your pot would be DOWN by £257,
and that’s before charges have been taken off. In this environment it’s understandable to consider stashing some or all of your money under the mattress.

However, it’s worth remembering that while cash will hold its nominal value, its spending power will be eroded over time by inflation. If you invested £10,000 in cash today (receiving no interest) and inflation ran at 2.5% a year, then in 20 years’ time your fund’s ‘real’ value would have fallen to just £6,027.

Investing your money can help to protect against the ravages of inflation and offers the opportunity of achieving real growth.

If we look at recent history, someone who invested £10,000 in the FTSE All-Share index at the start of 2010 – just as the global economy was hitting its recovery stride in the wake of the financial crisis – would have seen their investment swell to almost twice the size nine years later (again assuming dividends were reinvested and not including charges).

In fact, since the beginning of the 20th Century the FTSE All-Share has delivered inflation-adjusted total returns averaging 5.3%
per year. The lesson? While there are no guarantees, patient long-term investors tend to be rewarded.

As my colleague Russ Mould likes to say: ‘Investing in the stock market is a get rich slow scheme.’

While the political and economic environment might feel febrile at the moment, you should build your retirement investment strategy based on long-term goals. Trying to second-guess the impact of things like Brexit is nigh-on impossible, even for professional investors.

Think about the risks you’re willing to take and focus on building a portfolio that meets your needs, keeping costs as low as possible.

If you aren’t sure how to do this, many providers offer ready-made investment solutions which are designed to match various risk tolerances.


Send an email to with the words ‘Retirement question’ in the subject line. We’ll do our best to respond in a future edition of Shares.

Please note, we only provide guidance and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.

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