Your pension and the two stages of life

Your pension and the two stages of life

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice please consult us here at Wealth Solutions in our Edgbaston or Warwick offices.

Like any good story, our lives all follow a narrative arc. It starts with birth, school and then – for some – higher education. After that, you start work and eventually look to move into your own place. At some point, perhaps you start a committed relationship and have a family. As your life progresses, you need to grow your wealth (savings, property, investments etc.) to reach each new life goal. Eventually, however, the journey changes. Your kids leave home, the mortgage is nearly repaid and you’re thinking about retiring.

Financial planners broadly described the “accumulation” and “decumulation” stages of life. Of course, some people will not fit neatly into this – continuing to work, in some form, in their 70s, 80s and beyond. However, most people still follow this story arc. To prepare for the transition well, however, requires a strong financial plan that prepares you for a comfortable, sustainable retirement. Below, our team at Wealth Solutions offers some thoughts on how to do this.

We hope this is helpful to you. If you’d like to speak to an independent financial adviser then you can reach us via:

T: Edgbaston 0121 446 5815
T: Warwick 01926888091
E: [email protected]


During the accumulation phase (e.g. from your 20s until your 50s/60s), the aim is to invest efficiently to grow wealth over many years. This might involve building cash savings, growing investments in a stocks and shares ISA and contributing to a pension. It is the unspoken aim of everyone who puts money away for the future, to fund a future goal – especially retirement.

In this stage, it is important to build an appropriate investment strategy to build your wealth. This involves balancing your risk appetite on the one hand, with the aim to maximise growth/returns on the other. Here, you can usually afford to take on more risk (in exchange for higher potential returns). This is because you have a long period to recover from stock market falls. Indeed, during “bear markets” like these you can continue your contributions – buying assets “cheaper” and benefitting from greater growth as the markets eventually grow past their pre-crash highs. This is known as “pound cost averaging”.

With this said, you should not take needless risks. Diversification is important to ensure that you are not overly-exposed to shocks in one particular market, company or asset class. A financial adviser can be very useful here, suggesting ways to spread out your risk and access investment opportunities that may offer promising growth prospects.


Most people focus on the first stage of investing, above. Yet how will you eventually deploy the wealth you have built up, when you retire? This is the other side of the “retirement hill” – where you start to “draw down” what you have spent so long accumulating (to maintain a standard of living in retirement). This stage is quite complicated to work out.

First of all, people are living longer. So, your investments potentially need to stretch further. If you retire at 57, for instance, then – assuming you reach the average UK life expectancy of 81 – your investments may need to last over 24 years. Secondly, there are different ways to deploy wealth in retirement. You could keep a pension pot invested, for instance, but make periodic withdrawals to fund your lifestyle. Another option is to take a chunk of the pension money and buy an “annuity” (a financial product providing a guaranteed, lifetime income). Some people can even combine the two approaches – e.g. using an annuity to cover essential costs, whilst using drawdown to fund more discretionary spending.

The suitability of each of these options depends on a range of factors. In particular, how much you need/want to spend each year in retirement is important. In today’s environment of low interest rates, annuities – whilst offering high financial stability – do not pay incomes as high as they did in the early 2000s. To fund a more “luxurious” retirement lifestyle, therefore, you may need to focus on a drawdown approach. This tends to offer a higher monthly income (with a strong investment strategy), but can also mean there are periods when you need to lower your withdrawal rate due to poor stock market performance.

Another important thing to bear in mind with decumulation is inflation. The cost of living does not stay the same. The Bank of England (BoE) aims to keep the annual rises to 2%, but lately the UK has experienced inflation much higher than this (i.e. 7%, the highest rate in 30 years). This means that £1 in 2022 will buy fewer goods and services in 2023. As such, you need to take care that your wealth does not excessively erode over, potentially, 30+ years of retirement as your annual spending goes up. Again, this is where a financial adviser can offer some helpful advice and guidance to help ensure sustainability.


We hope this content has been informative and inspired you to develop your own financial plan. Please get in touch if you’d like to discuss these matters with us via a free, no-commitment consultation with a member of our team:

T: 0121 446 5815
E: [email protected]

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