Let’s jump straight in. Here are seven strategies that could help investors aiming to supercharge their passive income in retirement.
1. Use an ISA or SIPP
Over time, share investors can lose huge portions of their earnings through capital gains tax (CGT) and/or dividend tax. The good news is that two financial products — the Individual Savings Account (ISA) and the Self-Invested Personal Pension (SIPP) — exist that can eliminate these costs.
In recent years, dividend tax allowances have fallen sharply and are now just £500. Any dividend income after this is subject to tax.
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And things are going to get much worse on the CGT front. For the 2025/2026 tax year, basic- and higher-rate taxpayers will see tax rates jump from 10% and 20%, to 18% and 24%, respectively.
Unsurprisingly, ISAs and SIPPS are soaring in popularity as UK tax rules become harsher.
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.
2. Reduce trading fees
Fierce competition among product providers gives investors a chance to keep costs down. However, the differences in fees can differ greatly among brokerages. So it’s important that the broker an individual chooses is the most cost-effective for their needs.
Like tax, excessive broker charges can seriously eat into eventual returns.
Hargreaves Lansdown, for instance, charges up to £11.95 per share trade, though this drops after 10 trades. AJ Bell‘s fees, meanwhile, are either £5 or £3.50 each, also depending on the number of monthly trades.
Investors need to consider carefully the best broker for their investing style and needs. But it’s not all about cost. Some may be happy to pay more for extra services.
3. Invest wisely
When it comes to actually choosing shares, there’s no ‘one size fits all’ approach. The contents of each of our portfolios will depend on our individual investment goals and risk tolerance.
But there are some universal rules to consider when building an ISA or SIPP. These include:
- Buying stocks across multiple industries and regions to spread risk.
- Investing in value, growth, and dividend shares for a smooth return across the economic cycle.
- Ignoring short-term noise and investing for the long term (a favourite tactic of Warren Buffett).
- Reinvesting any dividends for large compound gains.
Investing in trusts can be a great way to achieve some or all of these goals. The JP Morgan American Investment Trust (LSE:JAM), to name just one popular trust, is one that’s delivered great returns over time.
This trust owns shares in almost 300 companies across various industries, with major holdings including Nvidia, Amazon, McDonald’s, Mastercard, and Berkshire Hathaway.
This provides excellent diversification and at little cost, too, compared to buying individual shares, which would incur multiple trading fees.
As its name implies, the trust provides targeted exposure to the US. This may leave it at a disadvantage to more global-orientated funds if America’s economy struggles.
But so far this hasn’t proved a roadblock for stunning returns. It’s delivered an average annual return of 16.19% since 2014.
An £88k passive income
Past performance is no guarantee of future returns. But a £250 monthly investment in this trust would — if its strong momentum continues — deliver a £2,198,961 pension pot after 30 years (excluding fees).
This would then deliver an annual passive income of almost £88k (£87,958), based on an annual drawdown rate of 4%.
