When looking at options for funding your retirement, it’s important to understand that your pension pot will be invested – and as with all investments, your capital is at risk.
Savings and investments are terms regularly used when creating financial plans. But what is the difference?
Saving is a way of putting money aside for the future. It is not a way of making substantial income, but a safer solution to short term needs. Savings are useful for building up a deposit for a property or paying for one-off events.
Investing typically means a longer-term commitment on the anticipation of growing more than through savings. Investments are better suited to those who don’t require easy access to their money and are prepared to take on some risk. With many investments, there is a risk that you might not get back what you invested in the first place. Risk includes occasional and inevitable downturns in the market. However, over the long-term (five years or more) those dips have historically smoothed out into an overall upward growth pattern.