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Retirement investment strategies

Here are some investment strategies on how you can generate a sustainable income that can see you right through your retirement.

Important information - please keep in mind that the value of investments can go down as well as up, so you may get back less than you invest. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

Understanding how income is produced and how you get paid that income will help you understand how you will receive the payments into your bank account that will replace the income you get from sources such as salary.

Having a drawdown plan within an account such as our Self-Invested Personal Pension (SIPP) will allow us to pay you an income according to your instructions. You'll need to move some of your savings into pension drawdown and then instruct us to schedule your income so you get regular payments according to how much, how often and when you want to receive payments.

To set up a drawdown plan or to transfer/open a SIPP with us you can call us on 0800 368 6882 and speak to one of our retirement specialists who will be able to explain the process. If you have already taken tax-free cash from your Fidelity SIPP you can set your new income instructions by completing an income amendment form.

Generating income from investments

For most, the aim of investing in retirement will be to generate as much income as possible while leaving enough of their pot intact so that it can survive as long as they need it to.

Income can be created by drawing down your capital - either from cash or by selling investments, or by selecting assets that naturally produce income. That includes shares of companies that pay dividends - or funds that hold such shares - or bond funds where a level of interest is paid regularly to the holder. Look for the income share classes of a fund, often identified with an ‘Inc’ label. You can hold both funds and shares within our SIPP.

Income like this may not be paid in a regular way. It could arrive every month, or every quarter, and the rate of income may rise and fall over the course of a year. So, for practical purposes, it can make sense to keep a chunk of your retirement fund in cash to meet your immediate income needs and avoid selling assets if the market goes down. Then, as income is generated from investment assets, the cash pot can be replenished.

Don’t forget that you still want your retirement pot to benefit from investment growth. This is what will help it last despite the regular income you’re taking. That means you need some assets that have the potential to keep their value or even grow over time and these may not pay income naturally.

Sustainable rates of income

Crucially, making your pot sustainable will require you to keep an eye on investment performance to make sure you are not taking a level of income that is unsustainable. The graphic below from Fidelity’s research shows how taking higher amounts of income reduces the chance that your pot will last. Read about our assumptions.

In 50% of our hypothetical scenarios that were studied, a withdrawal rate of 5.7% was shown to be sustainable over a 25 year retirement period. However, 50% may be regarded as a low probability; if you reduce your withdrawal rate to 4.8%, income is sustainable in 95% of hypothetical situations.

The lower the withdrawal rate, the higher the probability your retirement savings will last.

As investments can go down as well as up, it can make sense to reduce the income you take during these times. One way of doing this is by not selling your assets, so that they stay invested and have a chance to recover. Or perhaps you could limit your income to taking only the amount that’s generated naturally by dividends and interest. It’s also worth thinking about keeping some of your pension in cash so you can use that for income in the short term instead.

Cash, income and growth

Dividing your pension into seperate pots can help you secure an income and ride out the highs and lows of the market.


Keeping a proportion of your savings in cash can give you the security that you have money available to drawdown from. With our drawdown plan, we will make payments to you from cash you have in your account first. If there's not enough cash, we'll take it from your largest investment for regular payments, or proportionately for ad-hoc payments.

It's important to understand that if you don't have cash in your account and we need to sell your investments during a falling market to meet your income payment, your investments could be affected; we sell your units at a time when they have lost value, so we'll need to sell more units in order to maintain your income level. Having fewer units makes it more difficult for your pension to recover when (or of course, if) markets recover. Having a proportion of your pension in cash - say 3 - 5 years' worth of income - can help mitigate against this.

Income generating investments

To keep your cash pile topped up, you could consider keeping a proportion of the pot invested in income producing assets such as bond funds, income funds, dividend paying shares or multi asset income funds. This will add cash to the portion of your pot from the natural yield these types of investment produce.

At some point you might be required to sell investments in order to retain enough cash in your pot from which you take an income. Drawing income like this from capital will be natural if you plan to use the majority of your pension pot for your retirement. If you manage your income carefully you could avoid selling units during periods of market volatility.


Keeping some of your savings invested in growth investments – such as funds that invest in company shares – could help your savings keep pace with inflation. There is risk involved – the value of shares will go up and down – but it's important to keep in mind that you could be using your retirement savings for the next 20 years or more. If stock markets do go down, there can still be time for them to recover, although this is not guaranteed and you might not get back what you invested.


Preserving your wealth for the future

If you don’t need your pension to generate an income – perhaps you’re planning to carry on working or have income from other investments such as property – your priority could be maintaining the value of your pension for later life or for passing on to loved ones once you die.

If this is the case, you'll still want your pension to maintain its buying power and keep up with inflation. You could do this through investing in shares that are more defensive in nature. There are also funds where the objective is to protect your capital.

Ready to chat?

Call us

Call us now to book a free no obligation appointment with one of our retirement specialists on 0800 368 6882. We’re available Monday to Friday from 9am to 5pm.

Pension Wise

The Government's Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance over the telephone on 0800 138 3944 or go online.

Important information - Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not normally be possible until you reach age 55. Pension and retirement planning can be complex, so if you are unsure about the suitability of a pension investment, retirement service or any action you need to take, please contact Fidelity’s Retirement Service on 0800 368 6882 or refer to an authorised financial adviser.