As you enter your 50s, the reality of retirement starts to loom closer. This is the time to get serious about your finances and make sure your investments are working as hard as possible to support your future.
However, it’s also a period when many people face additional financial pressures, such as helping children onto the property ladder and caring for elderly parents. Balancing these responsibilities with your retirement goals can be challenging, but with the right strategies, you can make your investments work harder for you.
1. Revisit your goals
The first step is to take a fresh look at your financial goals. Retirement is just around the corner and it’s time to start thinking about what you want your retirement to look like. Do you plan to travel, pursue hobbies or simply enjoy a comfortable lifestyle? Whatever your vision, make sure it’s well-defined and realistic and you have an idea as to what it might cost.
But retirement isn’t the only goal you might have. You might also be saving for other important milestones, such as a child’s education or a new home. Revisiting all your goals will give you a comprehensive view of what you want to achieve and help you make informed decisions about your investments.
2. Review your investments
Once you have clear goals, it’s important to ensure that your investments are aligned with them. For example, consider your income needs post-retirement. If you’re planning to buy an annuity, which gives you a regular income for a specified amount of time, it might be a good idea to start moving your pension money into lower-risk assets like cash. This can help to prevent your pension pot declining in value just before you need to use it to buy an annuity.
On the other hand, if you intend to fund your retirement through flexible income drawdown, where your pension remains invested and you draw an income, staying invested will give your money the opportunity to keep growing over the long term. Remember, your retirement could last for several decades, and over that time, inflation will erode the real value of your cash savings, reducing your money’s purchasing power.
Investing in a mix of shares and bonds1 can help your money grow while balancing out the stock market’s ups and downs. Shares have historically offered higher returns than bonds over the long term but with greater swings in prices. Bonds typically offer lower but more stable returns over the long term. The mix of shares and bonds that’s right for you will depend on your goals and how you feel about investment risk. Read more about choosing the right investments for your risk appetite.
3. Accelerate your pension savings
In your 50s, saving into a pension should be a top priority. Checking how much you’ve saved in your pension so far can help you work out whether you’re on track to meet your retirement goals. If you’re facing a shortfall, consider increasing your pension contributions. Even small increases can add up over time and make a big difference to the size of your pension pot when you retire.
Personal pension contributions benefit from tax relief, which means a £100 contribution only costs £80 if you’re a basic-rate taxpayer, £60 if you’re a higher-rate taxpayer and £55 if you’re an additional-rate taxpayer. Most people can get tax relief on pension contributions of up to 100% of gross relevant earnings, capped at £60,0002. In some circumstances, you might be able to make pension contributions over your annual allowance and still benefit from tax relief. This is because you can ‘carry forward’ unused allowances from the previous three tax years. Read more about carry forward rules.
If you’re employed, you’ll also benefit from employer pension contributions, so it’s worth finding out exactly how much your employer can contribute. Some employers will pay in more if you increase your own contributions too, usually up to a certain percentage.
4. Make the most of your other tax allowances
Don’t forget about other tax-efficient ways to save and invest. An individual savings account (ISAs) is a great way to save for a range of goals because you can access the money whenever you like, tax-free. You won’t pay income tax on the dividends3 or interest you receive, and you won’t pay capital gains tax (CGT) on any profits you make when selling investments. You can save up to £20,000 in ISAs each tax year4.
If you have investments outside an ISA, such as in a General Account, you can make profits of up to £3,000 without paying CGT and receive dividends of up to £500 without paying dividend tax (2025-26 tax year). You can also receive up to £1,000 of tax-free interest, depending on your income tax band5.
If you’re married or in a civil partnership, you can effectively double up your allowances. You can also transfer savings and investments from one partner to the other without paying tax. This might come in handy if one partner is a higher-rate taxpayer and the other is a basic-rate taxpayer. By transferring investments into the basic-rate taxpayer’s name, you could benefit from a lower rate of tax – or pay no tax at all – on income and capital gains.
By making the most of your tax allowances, you can ensure that as much of your money as possible is working towards your future. If you’re unsure about your options, consider speaking to a tax adviser.
5. Balance investing with your other priorities
Many people in their 50s find themselves in the ‘sandwich generation’, juggling the financial needs of both their children and parents. If you’re helping your children onto the property ladder or supporting elderly parents, be strategic about how you allocate your resources. Consider setting aside a specific amount for these responsibilities without compromising your own future.
You might also be thinking about paying off your mortgage. This can provide a sense of financial security and reduce your living expenses in retirement. However, it’s important to strike a balance between paying off your mortgage and continuing to invest. If you have a low-interest mortgage, it might be more beneficial to keep making regular payments while investing any extra money you have. This way, you can benefit from potential investment growth while still making progress on your mortgage. Read more about what to consider when deciding whether to overpay your mortgage or invest.
1 Bonds are a type of loan issued by governments or companies, which typically pay a fixed amount of interest and return the capital at the end of the term.
2 For more on what counts as ‘relevant earnings’ that can earn tax relief when used to fund a pension, see the HMRC Pensions Tax Manual. Your annual allowance might be lower than £60,000 if you have a high income or you’ve already flexibly accessed your pension pot. To work out if you have a reduced (tapered) annual allowance, see HMRC’s website. If you’ve flexibly accessed your pension, you can work out what your alternative annual allowance is here.
3 Dividends are the payments some companies make to their shareholders out of their profits.
4 £20,000 is the most you can currently invest in ISAs in a tax year. The limit covers all types of ISAs.
5 For more information on tax-free interest see https://www.gov.uk/apply-tax-free-interest-on-savings.
Investment risk information
The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.
The eligibility to invest in either ISA or Junior ISA depends on individual circumstances and all tax rules may change in future.
Eligibility to invest in a Vanguard Personal Pension depends on your individual circumstances. Please be aware that pension and tax rules may change in the future and the value of investments can go down as well as up, so you might get back less than you invested. You cannot usually access your pension savings or make any withdrawals until the age of 55, rising to the age of 57 in 2028.
If you are not sure of the suitability or appropriateness of any investment, product or service you should consult an authorised financial adviser. Please note this may incur a charge.
Any tax reliefs referred to are those available under current legislation, which may change, and their availability and value will depend on your individual circumstances. If you have questions relating to your specific tax situation, please contact your tax adviser.
Important information
Vanguard only gives information on products and services and does not give investment advice based on individual circumstances. If you have any questions related to your investment decision or the suitability or appropriateness for you of the product[s] described, please contact your financial adviser.
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