Is it too late to start investing at 60?

Q. I have little experience of funds or stock markets but am thinking about trying to learn. Am I too old to start investing in stocks and shares at 60?Anthony, Devon
You are absolutely not too old — it’s never too late to start investing. According to the Office for National Statistics, the average life expectancy for men who are 60 years old today is 85 years. There is a 25 per cent chance of living to 92, and a 10 per cent chance of reaching 97. These numbers suggest that you have plenty of time to become an investor.
Before you begin, it’s important to make sure you have some cash set aside to cover emergencies, as well as for any upcoming planned expenses such as a new car or some home refurbishments. Any cash savings on top of that could be invested. Here’s what to consider.
When investing in the stock market it is possible to choose from a variety of assets with different characteristics.
At the lower end of the risk scale, government bonds or corporate bonds are a way of lending money to governments or companies in return for fixed rates of interest. Bonds are ideal for investors who want a regular income stream and not too much volatility.
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On the next rung of the risk ladder are so-called alternative assets such as commercial property funds or infrastructure funds. These provide investors with rental incomes, as well as a way to gain exposure to a physical asset that will hopefully appreciate in price.
At the upper end of the risk scale, shares offer the opportunity to be a part-owner of a company and to share in its profits as it grows. With more risk comes the potential for more return. An analysis of markets over the past century suggests that UK shares have generated an average annual return of at least 5 per cent above inflation. Bonds have produced about 1.4 per cent, whereas cash has achieved less than 1 per cent. This data supports the view that cash is not the best home for long-term savings.
The amount of time you have to invest is a key consideration when selecting a risk level. Those who need their money back within five years would be best suited to a lower risk portfolio with a large proportion of bonds, whereas those with more than ten years may opt to invest purely in shares.
The investor’s aims should also be considered. If you require steady income, then corporate bonds, commercial property and dividend-paying shares make sense. If growth is the goal and income is not needed, then shares in the fast-growing technology sector and smaller companies may appeal.
Investing in the stock market can be more tax efficient than holding cash. The interest on cash is taxed as income, whereas the dividends on shares are taxed at a slightly lower rate. Much of the return from shares will come from capital gains rather than dividend income, and capital gains tax (CGT) rates are, at the moment, lower than dividend tax rates. That said, there has been plenty of speculation that CGT rates will be raised in this month’s budget, so this is an area to keep an eye on.
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As the regulations stand at the moment, certain (but not all) shares on the UK’s Aim (Alternative Investment Market) are eligible for business relief, which means they will be exempt from inheritance tax if held for two years or more. Aim shares are very volatile and are not suited to cautious investors, but are worth considering for those who wish to prioritise estate planning. As above, it would be wise to wait and see if the budget makes any changes to the rules before investing.
Finally, don’t forget that investments can be held in a stocks and shares Isa, which will protect you from dividend tax and CGT. Furthermore, a surviving spouse or civil partner can benefit from the Isa allowance of an Isa holder who has died. The additional permitted subscription rule entitles the survivor to an additional Isa allowance equivalent in value to the deceased’s Isa on the date of death, regardless of whether they actually inherited the money in their partner’s Isa.