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Your retirement saving...

14 January 2022

4 min read

Your retirement saving options outside of a pension

While pensions are a key part of saving for retirement, they're not the only option. Other alternatives can supplement this and offer you more flexibility.

Dale Scorer
Dale Scorer,

Financial Planner

Traditionally we have thought about pensions as the primary way of funding this chapter of our lives and they remain the cornerstone of good retirement planning. However, with limits on both the size of pension funds and the contributions you can make, as you plan for your retirement you should consider your income as coming from a range of sources.

Drawing from several sources allows you to take an income in a much more tax efficient manner, which can be adapted if your circumstances change.

How to split investments outside your pension

For investments outside your pension, we would recommend you split this out into short-term, medium-term, and long-term pots.

Your short-term pot should contain three to six months’ worth of expenditure – your ‘emergency fund’ and any ad hoc expenses due within the next 24 months. This should be easily accessible and not locked up for a fixed period.

One option to consider is NS&I Premium Bonds. Instead of interest there is a monthly prize draw for tax-free prizes, with a one per cent annual prize fund rate and they are 100 percent protected by the UK Government.

Although cash savings offer protection, interest rates are historically low, and many accounts aren’t keeping pace with inflation. In real terms, this means your cash retirement savings could be decreasing in value. It is therefore important that your medium-long term pots are being invested to target inflation.

Stocks and Shares ISAs

Outside your pension a Stocks and Shares ISA offers a tax efficient way to invest for the future. Each year you can save up to £20,000 in your Stock and ISA, invested in a wide range of investments including funds and shares. Any gains are exempt from UK Capital Gains Tax. You don’t pay UK tax on any income you receive from your ISA. And you don’t need to declare any of this on your tax return.

As an ISA has a limit on how much you can contribute – where to next?

When your ISA is full

A General Investment Account (GIA) is a way to invest more money once you’ve used up your ISA limit for the tax year. Much like the Stocks and Shares ISA, the GIA can be invested in a wide range of investments including funds and shares. A GIA has no limits on how much you can invest each year and you don’t need to lock your funds away until a certain age.

However, investment accounts do not offer the same tax benefits as pensions or ISAs, meaning that any interest/dividends you receive from your investments may be subject to income tax and any gains that you make when selling your investments may be subject to capital gains tax.

Although these accounts are taxable, your dividend and capital gains tax allowances can be utilised before any tax becomes payable.

Take note of investment risk

It’s important to note with both GIA and ISA investments, there is investment risk and it’s likely the value of your savings will fluctuate, falling as well as rising over the short term. As a result, it’s usually only advisable to invest if you have a time frame of at least five years, allowing you to ride out short-term dips.

Remember, Stocks and Shares ISAs and GIAs typically come with several different investment options with various levels of risk. It’s important to pick a profile that suits your attitude to risk and future goals.

Guide to financial planning

The Good Guide to Financial Planning,  shows you what to do with your money for the best as you navigate major life stages such as buying your first home, getting married, having children, the ‘peak earning’ years’ and retirement.

Download your free copy here.

Dale Scorer

Dale Scorer

Financial Planner

Dale joined EQ in 2020 as a Senior Financial Planner and has worked in financial markets for over 11 years. She has held various positions in the finance industry, from currency trading to wealth management before settling as a Financial Planner in the UK. Dale brings a wealth of knowledge and experience with her, as well as a creative and unique approach to problem solving. As a retired professional athlete, who represented her country in gymnastics, she understands that no achievement comes without dedication. She brings that same commitment, determination and focus to her clients, helping them achieve their financial goals whilst building long term trusted relationships with them. Dale graduated with Honours in Finance from the University of Johannesburg, South Africa where she was born. She is also CFA charter holder, being a regular member of the CFA Institute and CFA UK society. Outside of the office Dale enjoys spending time with her family and travelling with her husband around the world aiming to explore and enjoy as much of it as possible


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