02-08-2025
My pension is up £167k — and I've only put £7k in
When Jaspal Saund transferred £743,000 that he had spent years building up in workplace pensions into his own self-invested personal pension (Sipp), he was terrified.
'If you lose the money, it is on you, nobody is going to step in and help you,' said Saund, 56, who is a chartered accountant.
Yet he felt it was something he had to do to turbocharge his pension, as getting a Sipp would allow him to invest more heavily in the stock market.
Now, nearly 20 months and 95 trades later, Saund, who lives in South Woodford, east London, has grown his pot by £167,000, to £910,000, despite saving only £7,200.
His goal is to have a pension pot of £2 million before his planned retirement at 67.
'Pension portfolio theory tells you that at my age you should really be much heavier in bonds and gilts and less in equities,' Saund said. 'But staying more heavily invested in shares has paid off and propelled me closer to my goal.'
• Top of the pension pots: the best place for your Sipp
Saund's decision to take control of his pension and concentrate his investments on the stock market is not the usual strategy for people who are approaching retirement.
Most of the 22 million employees who are signed up to workplace pensions are part of their companies' default schemes. Many of these schemes automatically move clients into less risky assets in the years leading up to retirement.
Helen Morrissey from the investment platform Hargreaves Lansdown said: 'A popular approach taken by many default funds is to adapt to what is known as lifestyling, where you are switched out of equities to lower-risk assets such as bonds, the closer you get to retirement.'
Equities are considered to be more risky because they are subject to market volatility and potential losses. Bonds are effectively IOUs from the government or companies. The returns are guaranteed and in the case of UK government bonds — known as gilts — there is very little chance of default. They also provide regular interest payments. By switching to bonds, savers can ensure their pots are protected from the ups and downs of the stock market.
This lifestyling process can happen up to 15 years before someone's stated retirement date. But it can mean missing out on significant returns.
Someone on a starting salary of £25,000 at 22, who retired at 65 and saved 8 per cent into their pension throughout their career would have a pot worth £283,000 if it was moved into less risky assets (with 33 per cent stocks and 42 per cent bonds) 15 years before retirement, according to the consultancy Isio. If that pot stayed in the typical growth fund (with 83 per cent shares and 6 per cent bonds), it would be worth £308,000. This assumes a salary increase of 2 per cent a year and investment growth of 7 per cent a year after fees.
Saving enough for retirement has become increasingly important as life expectancy and the cost of living have risen.
In June the trade association Pensions UK reported that the minimum amount required for a single retired person to live a comfortable retirement was £43,900 a year after tax, assuming you don't have to pay rent or a mortgage, up from £33,600 in 2021. You would need pension savings of at least £800,000 to afford that standard of living, according to the wealth manager Quilter.
Laith Khalaf from the investment platform AJ Bell said: 'For many people, there is a fundamental mismatch in terms of what the lifestyle investment strategy is trying to achieve and what is going to happen in their retirement.'
Saund puts £400 into his Sipp every month. He also has a workplace pension into which £780 is paid by his employer every month and a £20,000 pension from a former employer that could not be moved into his Sipp.
• The cheap and easy way to invest (without the risk)
'I've got three kids and because of the nature of what I do, and how intense it is, I probably can't keep doing this past 67,' Saund said.
'My target is to get to £2 million to be comfortable, which is achievable over the next ten years, if I don't do anything stupid.'
After consolidating four of his workplace pensions into a Sipp with AJ Bell, he was given full control of the stocks and funds he invested in.
His wisest move has been to heavily back US tech stocks. This included ploughing £262,000 into JP Morgan's US Select Equity fund, and £200,000 into the bank's US Technology fund.
After seeing what he called a 'wobble in the US market' last July, he sold the US Select Equity fund, which invests in Apple, Microsoft and Amazon, for £332,000, while the US Technology fund was sold for £223,058.
Saund is also one of many winners from investing in the US chipmaker Nvidia, which was recently valued at $4 trillion. He has a stake worth about £188,000, having bought the shares for £143,700. This included buying £75,000 worth between late February and early March, after they fell 8 per cent on news of a weaker-than-expected quarterly forecast. That £75,000 investment is now worth more than £98,000.
Saund's decision to keep heavily invested in equities instead of following the lifestyling approach has paid dividends. Analysis by AJ Bell found that if he had transferred all his £743,000 pension pot to the average lifestyle bond fund (which is fully invested in long-dated bonds with the purpose of preparing for retirement) in October 2023, it would be worth about £792,000.
But even Saund has decided to reduce his risk in the past year amid market volatility. Last August he used some of the proceeds from selling the JP Morgan Funds to buy £400,000 of 30-year UK Treasury bonds with an interest rate of 4.25 per cent. He bought another £100,000 of bonds in March. In total they return about £22,000 a year, providing another boost to his retirement funds.
• Banks to push cash savers towards investing
While the potential returns of having all of your pension in equities might be appealing, it comes with its risks.
'If you take out a full equity approach and are reliant on it for income, you could be having to sell shares when they are at market lows,' Khalaf said.
And lifestyling still has a place, particularly for those who don't want to actively manage their investments, according to Sonia Kataora from the investment consultancy Barnett Waddingham.
'Lifestyling can offer a hands-off approach, which can be reassuring to individuals not confident or interested in managing their pension investments.'
