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Are there other ways to save for retirement?
This section of workSMART deals with pensions, but here are other ways to save and invest that can be used to put aside cash for when you have retired.
However, the most common alternative to having a pension is not having any significant retirement savings at all. This means you will rely on the State Pension and means-tested benefits when you retire. How far above the poverty line – if at all – this takes you will depend on the generosity of the government of the day.
There are some alternative ways to save for retirement. One advantage of saving for a pension is that if you are a taxpayer, you will get a tax rebate on your contributions. This means that it costs 80p for a standard rate taxpayer to save £1 of extra pension. If you’re in an auto-enrolment workplace pension your employer must contribute too.
But there are other tax incentives for saving. You get different, but also valuable, tax advantages with special savings accounts called ISAs.
You can find out more about ISAs (and other savings) on the Money Advice Service website. Tax help with ISAs is in addition to tax help with pension contributions. So you can do both (if you can afford it).
It makes sense to build up some 'rainy day' savings to which you have easy access, before putting money away in a pension scheme where you cannot touch it until you retire. Many experts suggest that a good savings target for a rainy day fund is about three month's take-home pay.