Investing in a SIPP (Self-Invested Personal Pension) is one of the best ways to build wealth for retirement in the UK. Not only are all gains income tax-free, but contributions are boosted by tax relief.
Last week, I put £4k into my SIPP in an effort to build my retirement savings. Here’s how I’m going to invest it.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
An near-instant 25% return
Let me start by saying that I’ll have more than £4k to invest. Thanks to tax relief, I’ll receive another £1k in my account from the government in the next few months (a risk-free 25% return). So in total, I’ll have £5k to invest.
If I invest this well, this could grow to a large sum by the time I come to retire.
Today, I’m 44. If I was to generate a 9% return on that £5k for the next 20 years, it could be worth around £28k by the time I’m 64. If I was to keep growing it at 9% a year until I was 70, I could be looking at nearly £50k.
Where I’m investing
Now, I’m not going to invest this money all at once. I prefer to drip feed money into the markets over time (especially after they’ve had a great run).
However, one product I will put some money into right now is the Schroders Global Healthcare fund. There are two reasons why.
First, my portfolio is very tech-heavy at present. I want to diversify into other sectors to reduce my risk levels. Second, healthcare offers a nice mix of growth and defence, to my mind. If we were to see an economic slowdown, companies in this sector may provide some protection.
It’s worth noting that this fund returned 11% a year for the five years to the end of May. Past performance is not an indicator of future returns though.
A promising holding
One stock in the fund I’m really excited about is Novo Nordisk (NYSE:NVO). It’s the maker of GLP-1 weight-loss drugs Wegovy and Ozempic.
This company’s having a huge amount of success right now, thanks to its weight-loss drugs. This year, revenue’s forecast to grow 26% to $41bn.
I suspect the growth story here is just getting started. According to analysts at Barclays – who have called obesity drugs the healthcare ‘story of the decade’ – the industry could be worth $200bn annually by 2030 (versus $11bn in 2023).
Given the potential market size, some analysts believe these drugs could become one of the pharma industry’s biggest success stories.
It’s worth pointing out that Novo is facing competition from Eli Lilly, which also has weight-loss drugs on the market today. It could also face competition in the years ahead from Amgen and AstraZeneca, both of which are developing their own products.
The good news is that the Schroders Global Healthcare fund has a large position in Eli Lilly (at the end of May it was the largest holding while Novo Nordisk was the fifth-largest). So all my eggs aren’t in one basket.
