Save or Invest?

Deciding how to build up your pension is an important financial decision. Two common options for building up a pension is by opening a blocked savings and/or investment account. Both type of accounts have their advantages and disadvantages, and it is important to understand the differences before making a decision on how you want to build your pension.

Annual allowance

When building your pension, be careful not to exceed your annual allowance. For more information, read our article on the annual allowance.

Pension Account Saving or Investing?

With a pension account you build a pension pot for later that no one can touch. Your pension pot sits a closed account that you can't withdraw money from - after all, it's for your retirement. Have your money paid out periodically when you retire as gross income.

Saving for your retirement means regularly depositing money into a retirement savings account, receiving interest in return.

Investing for retirement involves regularly depositing money in a retirement account-investment, investing in stocks and/or bonds.

Important Considerations

  • Risk tolerance: Determining your risk tolerance is essential. If you are willing to take more risk for potentially higher returns, investing may be more suitable.
     
  • Time horizon: For your retirement planning, you need to consider the time horizon. Are you building up a pension for a longer period of time? Investing can make sense if you have a longer period until you retire, as the risk of investing decreases the longer the period is.
     
  • Diversification: A good diversification of investments can reduce risk. Additionally, it is possible to keep a savings account as well as an investment account.
     
  • Inflation: A high inflation rate reduces the value of your assets, so you want to make sure your retirement savings increase at a higher rate than inflation. Investing is more likely to stay ahead of inflation.


Whether you choose to save and/or invest for retirement, it is important to make an informed decision based on your financial goals, risk tolerance and time horizon. Combining all factors can also be a strategic way to maintain both stability and growth potential in your pension provision. Always consult a financial adviser to develop an approach that best suits your individual situation.