If you don’t have a pension, you’re not alone — a study from last year indicates one in five working Brits are facing retirement poverty because they have failed to save into a pension.1 As common as it may be to not have savings in a pension, it’s a good idea to have one.
New laws require all employers to provide a workplace pension,2 so ask your employer about it if you are employed and don’t have one. If you’re not employed, you may want to consider these alternatives to having a pension.
1. Individual Savings Accounts
An ISA is a special type of investment that is free of income tax on dividends and interest, and exempt from capital gains tax. They essentially protect your savings from being taxed. ISAs can be invested in shares and bonds including unit and investment trusts.
One of the main difference between a pension and an ISA is that pensions are contributed to with money that hasn’t been taxed, whereas ISA money has been taxed prior to its deposit (since you first receive the money as income). ISAs are available to anyone over 18 that is a UK resident.
2. Investing in Your Own Property
The idea here is that you continually move up to larger/more valuable houses throughout your career, and then downsize when you retire. The profit that you make on the sale of your home becomes your retirement savings. There is risk involved in using property as retirement savings. The value of your property may decrease and you won’t get the same tax savings as you would with a pension or ISA.
3. Buying Property to Lease
Buying a residential property with the intention of leasing it to other individuals is another possible alternative to a pension. This idea can require a considerable amount more time and resources than traditional methods of saving, however, as you’ll need to maintain the property and act as a landlord for your tenants.
4. Don’t Stop Working
Of course, one of the alternatives to not having a pension is to never stop working. Whether that means you continue to perform the type of labor you’ve done throughout your life or learn a new skill or trade or pick up a part-time job is probably dependent on your interest level and health. If you don’t find this idea desirable, it would probably be best to make sure you obtain and pay into a pension prior to retirement age (and generally the sooner, the better).
The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.
1Kirby, E. (4 April 2017). One in Five Brits Have No Pension Savings and Face Retirement Poverty. Retrieved 9 July 2018 from https://www.thesun.co.uk/money/3249022/shocking-study-reveals-one-in-five-brits-have-no-pension-savings-while-many-dont-know-how-much-they-already-have/
2 Government Digital Service. (26 January 2015). Workplace pensions – what your employer can and can’t do. Retrieved 16 July 2018, from https://www.gov.uk/employers-workplace-pensions-rules