Pension alternatives: what are my options?

Figuring out the best way to save for retirement can be difficult - especially if you don’t have access to a workplace pension.

There are lots of pension options available, but there’s no one-size-fits-all. 

Here is everything you need to know about the best pension alternatives and saving for your retirement.

What is the state pension? 

A state pension is a type of benefit that the government pays to help you cope financially when you retire.

The total amount you’re entitled to will depend on how many qualifying years of national insurance (NI) contributions you’ve built up. 

If you’ve racked up 35 qualifying years, you could receive the maximum amount of £241.30 a week (in the 2026/27 tax year).

Who qualifies for the state pension? 

Whether or not you qualify for the state pension depends on your national insurance contributions. 

To get the full state pension payment, you will need 35 years of contributions.

However, if you have less than 35 - but more than 10 - you’ll qualify for a proportional payment.

You will usually pay national insurance if you work (including if you are self-employed) and make payments alongside income tax, so long as you meet certain earning thresholds.

Or, if you claim certain benefits (including child benefit or job seekers allowance), you can also get national insurance credits to build your entitlement to the state pension.

Voluntary national insurance contributions are also an option if you have gaps in your national insurance record, or don’t earn enough to qualify.

There are other alternatives to a  pension that you arrange yourself, which can be used alongside the state pension.

What is a workplace pension scheme? 

These are the retirement saving ‘norm’.

All employers must offer to enrol employees aged 22 or over who earn more than £10,000 a year onto a workplace pension.

You can opt out, but you’ll miss out on a tax-efficient way to build a pension pot.

Once you’re enrolled, both you and your employer will make contributions, building up the funds throughout your years of service. 

When you leave one job, your scheme will carry on, even if you aren’t making further contributions, or start saving in a new workplace pension.

Workplace pensions are an important part of planning for your future retirement.

The state pension alone is rarely enough to fund your retirement.

The maximum is just £12,540 a year. However, the Retirement Living Standards suggest an individual needs £31,700 for a moderate standard of living or £43,900 if you are in a couple.

What happens to my workplace pension when I move jobs? 

Due to auto-enrolment, you should be enrolled for a workplace pension when you change jobs if you’re eligible.

If you wish, you may be able to transfer your old pension into your new one. Or, you can transfer it into a new personal pension like SIPP. Otherwise you can leave it as it is to grow.

Your employers, both new and old, will be able to offer guidance if you need to take any action.

It is always a good idea to speak to a financial adviser to make the most of your different pensions.

Who doesn’t qualify for a pension? 

Not everyone qualifies for a workplace or state pension, so it’s always a good idea to start thinking about your pension in advance. 

For example, unlike employees, freelancers are not usually included in workplace pension schemes. 

Or you may simply choose not to be part of your workplace pension scheme, saving the funds you would’ve contributed elsewhere instead (although you would miss out on employer contributions and, depending on the alternative you choose, tax relief).

There are a few different retirement saving alternatives and options if a workplace pension scheme isn’t available to you: 

• Individual savings accounts (ISAs)

• Self-Invested personal pension (SIPP)

• Investments

• Property

What is an ISA? 

One of the most common ways for people to save for their future is with an individual savings account (ISA).

This is a personal saving pot, and many people use them to save for later life or to buy a house. 

There are different ISAs, such as cash ISAs, stocks and shares ISAs, innovative finance ISAs, and lifetime ISAs. 

If you opt for the latter, you won’t be able to withdraw funds from your ISA without incurring a withdrawal fee until you buy a home, are aged 60 or over, or are terminally ill.

A lifetime ISA is also available in the form of cash or stocks and shares.

Investing in an ISA is a flexible way to save for your future. 

The benefits of ISAs

The big draw for saving in ISAs is the tax benefits: there will be no taxes to pay as your money grows, or when you make withdrawals.

Each year you can save up to £20,000 into ISAs - this can be in one ISA or several.

Just note that the maximum you can pay into a lifetime ISA is £4,000 a year (which counts towards your overall ISA allowance) but you do get the added benefit of a 25% bonus  from the government each year.

Lots of people like the idea of saving into an ISA rather than pensions as they are less complicated and you can access your money whenever you need it (the youngest you can access a pension is 55, rising to 57 in 2028).

But pensions offer tax relief on contributions, which over time, is likely to outweigh the benefit of tax-free withdrawals on ISAs.

Both products have their pros and cons, but if you can afford it, it makes sense to pay into both an ISA and a pension to add flexibility to your retirement income.

Also, if you have a long-term goal, like retirement,  it’s worth considering a stocks and shares ISA rather than cash. This is because cash ISAs are unlikely to deliver the returns you’ll need.

A financial adviser can help you work out the best way to use ISAs in your retirement planning.

What is a self-invested personal pension (SIPP)? 

A self-invested personal pension (SIPP) gives you more control over how your pension is invested (compared to workplace or other personal pensions).

The right option for you will depend on a number of factors, including your appetite for risk, the kinds of returns you’re looking for, how long you have until you retire and whether you’re willing to lock the funds away. 

Enthusiastic investors may prefer the potential of a SIPP over a more restricted workplace pension.

However, it doesn’t usually make sense to opt out of your workplace pension, if you have one. This is because you would miss out on employer contributions.

It makes sense to pay into a SIPP on top of your workplace pension, so long as you don’t exceed your annual allowance.

If you’re not sure which kind of SIPP to choose, it’s best to seek professional advice before setting one up.  

Can I use property to save for retirement? 

Property has long appealed to many investors and some will use it as an alternative to traditional pensions.

A well-chosen rental property can provide you with a regular income and the potential for capital growth.

However, while property has performed well for many investors, it is becoming increasingly difficult to manage.

Running a successful let requires a lot of effort and over time the requirements of landlords have become more onerous. Taxes for property investors have increased too.

This means that more landlords are asking if buy-to-let is still worth it.

Can I manage my pension digitally? 

Technology has changed how many live and work, and pensions are no exception.

If you’d like to manage your pension digitally and make investments and savings from the comfort of your sofa, many companies offer this via their apps.

Get expert financial advice

If you’re thinking about retirement, it’s important that you understand all the options that are open to you. 

Whether you qualify for the state pension, participate in a workplace pension or want to explore alternative savings vehicles like ISAs or SIPPs, it’s important to choose the right approach for you.

By exploring these options, you can take control of your financial future and ensure you have the resources you need for a comfortable retirement.

Let Unbiased quickly match you with a financial adviser for expert financial advice on selecting the best pension options and building a retirement plan tailored to your needs. 

If you found this article helpful, you might also find our guide on pensions vs ISAs informative, too.