When is the Right Time to Invest a Lump Sum in a Pension?

I’ve used up my ISA allowance for this year and I’m trying to find other tax-efficient ways of investing my money. I’m 37 and have a pension I pay into regularly. Is now the right time to invest a lump sum in my pension or should I hold off?

Question asked by Mr S Kapoor

When’s the Best Time to Invest a Lump Sum in My Pension?

The short answer is as soon as possible.

The sooner you invest a lump sum in your pension, the longer it will have to grow. The later your start saving, the more you’ll have to pay into your pension to achieve the best retirement income.

You’ll also be able to take on more investment risk if you invest a lump sum early on, which could offer more chance for growth.

This is opposed to investing later in life as you approach retirement, when it’s likely your pension pot will effectively be ‘de-risking’. This involves a shift into safer investments, such as cash and gilts, to help insulate you from market shocks at a stage in your life where you don’t have much time left before retirement to rebuild your fund should it suffer heavy losses.

As you’ve mentioned, investing into a pension — whether regularly or as a lump sum — is a tax-efficient investment choice. Not only will you get tax-free growth on your savings, but you’ll also benefit from valuable tax relief on any lump sum contribution into your pension, worth 20% for basic rate taxpayers, 40% for higher rate taxpayers and 45% for additional rate taxpayers.

However, remember that you won’t be able to get your hands on your savings again until you reach the age of 55, so you’ll need to be certain that you won’t need to access your money before this age before you invest any lump sum.

You haven’t mentioned any family, but some parents — acting in the capacity of the Bank of Mum and Dad — are increasingly offering their children help with a mortgage deposit, for example. Locking away a lump sum in your pension today might mean you don’t have access to your cash if you need it.

If you’re not sure, then it might be worth putting some of your lump sum into a pension and the remainder somewhere more easily accessible.

Make Sure You Get Financial Advice…

Before making any big investment decision, you should strongly consider getting financial advice and/or pensions advice. An adviser will be able to help you make sure it’s the right decision for you.

Our Services & Tools

Get In Touch

Do You Need Some Help?

Our purpose is simple: Improve Your Financial Wellbeing.

We use clever technology to bring your financial future to life 🤓

See Your Financial Future
  • Find, organise and simplify your Pensions, ISAs and other investments.
  • Plan your financial future and put a strategy in place to achieve this.
  • Regularly review how you are doing to make sure you stay on track.

Pension Pot Calculator

Pension Drawdown Calculator

Final Salary Calculator

Contact Us
Head Office & Pensions and Investments
Senator House
85 Queen Victoria Street
London
EC4V 4AB
Personal Insurance & Accounts Payable
Telecom House
125-135 Preston Road
Brighton
BN1 6AF
Drewberry London Office MapDrewberry Brighton Office Map
Our Core Principles
  • 1You Come FirstWe are a client focused business who always aim to put you first.
  • 2We are ExpertsTo provide you with the best advice, we need to know our stuff!
  • 3We are HumanWe are real people with feelings who are here to help you.
  • 4We are ProfessionalProviding a 5-star service requires a professional approach to everything we do.
  • 5We are here to EducateWe don't believe in sales, we are here to educate so you can make informed decisions.
Finalist - Moneyfacts AwardsFinalist - Cover Excellence AwardsHighly Commended - Protection Review Awards
Proud member of AMII (Association of Medical Insurers & Intermediaries)Proud member of Money Advice ServiceProud member of UnbiasedProud member of BIBA (British Insurance Brokers' Association)

If you are unhappy with our service, we have a complaints procedure, details of which are available upon request. If you are unhappy with how your complaint has been dealt with, you may be able to refer your complaint to the Financial Ombudsman Service (FOS). The FOS website is www.financial-ombudsman.org.uk.

Drewberry Ltd is registered in England and Wales. Companies House No. 06675912

Drewberry Ltd registered office: Telecom House, Preston Road, Brighton, England, BN1 6AF. Telephone 0208 432 7333

Drewberry Ltd (Financial Conduct Authority No. 505473) is an Appointed Representative of Quilter Wealth Limited and Quilter Mortgage Planning

Limited, which are authorised and regulated by the Financial Conduct Authority.

Cookie Use

Drewberry™ uses cookies to offer you the best experience online. By continuing to use our website you agree to the use of cookies. If you would like to know more about cookies and how to manage them please view our privacycookie policy.