The road to a financially secure future is different for everyone. For most people, saving for retirement means contributing to a workplace pension. A pension is a type of retirement plan where an employee adds money into a fund that includes contributions by the employer. A pension has significant advantages that could make your savings grow more rapidly than they otherwise would.
However, the government has repeatedly cut pension saving allowances for hard-working individuals. In fact, over the last decade, the amount that can be contributed annually to a pension has been reduced by a massive 80% – and even more for high earners.
As life expectancy continues to rise, the number of employers announcing that they are going to restrict or even shut their final-salary pension schemes are on the increase. Large deficits and rising underlying costs are the common reason. A critical factor in those calculations is that the pensions that have been promised will have to be paid for much longer.
With the average retirement now set to last at least two decades, savers need to make full use of all the tax allowances and exemptions available to help them create a sufficient pot. If you’re not sure whether a pension is your best option, or you have exhausted your pension allowances, here are some alternative ways to save for retirement that you might want to consider.

1) Overseas Property Investment

Overseas property investment can seem like a very daunting prospect if you don’t have any experience in this area. However, if you have available capital, it is definitely an option worth exploring.
Sierra Leone is a country in West Africa that has a special significance in the history of the transatlantic slave trade as the departure point for thousands of West African captives. The capital, Freetown, was founded as a home for repatriated former slaves in 1787. But the country’s modern history has been overshadowed by a brutal civil war that ended in 2002 with the help of Britain, the former colonial power, and a large United Nations peacekeeping mission.
Sierra Leone has experienced substantial economic growth in recent years, despite the disastrous effects of the civil war continuing to be felt. The country is rich in diamonds and other minerals which resulted in the trade of illicit gems. These precious gems, known as “blood diamonds”, are diamonds that have have been mined in a zone of conflict and sold for profit to finance war efforts. It is an extremely damaging trade that the government has sought to crack down on and bring to an end.
Since the end of the civil war, civil society has flourished in the country, and property prices have risen considerably. The country has seen a massive influx of Chinese and Lebanese businessmen and women searching for an opportunity which has led them to buy a significant amount of land in this beautiful forgotten country.
For those looking for an investment income, this could be a fantastic opportunity. Due to the conflict, Sierra Leone has experienced in the past there is a heavy presence of Non-Governmental Organisations (NGOs), mainly charities. Many of these charitable organisations need to provide safe and comfortable living accommodation for their staff. Typically, the charities pay rent upfront for periods of one to five years. Rental properties in Sierra Leone potentially offer an average rental yield of 15-20%, in comparison to London’s average of 6%, it is possibly a very attractive and lucrative opportunity to top up your retirement fund.
Pictures ideas (small map of African with Sierra Leone highlighted

2) Venture capital trusts (VCTs) and enterprise investment schemes (EISs)

If you have made full use of your pension allowances and are keen to stick to investments that offer some form of Income Tax relief, you could consider VCTs and EISs. A VCT aims to make money by investing in small companies that are not listed on any recognised stock exchange.
This provides investors with an easy way to access the enormous growth potential of brand-new start-ups and social enterprises. There are stringent rules on how your money is invested. VCT and EIS investments must be made in companies that have objectives to grow and develop. There should also be a significant risk of loss of capital, after allowing for tax relief, to prevent an emphasis on capital preservation.
EIS and VCT investments are typically only suitable for experienced and high-net-worth individuals who have a significant tax liability to offset and are willing to take a high level of investment risk. The companies that qualify for investment through an EIS or VCT are at higher risk of failure and investors must be prepared to weather significant levels of volatility. With something as important as your retirement savings, you may feel the chances are too high.

3) Property

If you are a property owner, another option to consider is selling or downsizing and using the proceeds of the sale to fund retirement. Understandably, many do not want to sell their family home. If you would like to stay in your home an equity release plan, which allows you to access the value in your house without having to sell it, is another option.
However, you need to be cautious of interest rates as they can snowball over time and you should be mindful that tax and welfare benefits may be affected. You must check that the chosen plan will meet your needs as you may not be able to rely on the value of your property later in life, when you may be thinking about downsizing, funding long-term care, or passing on an inheritance.
Property can potentially provide you with an attractive upfront lump sum that can be very useful as you enter retirement. However, if you’re in a workplace pension scheme and get a contribution from your employer, that bonus combined with tax relief at your highest marginal rate makes the traditional way of saving for retirement hard to beat.

4) Individual Savings Accounts (ISAs)

ISAs are one of the most popular ways to save for the future and can complement any pension savings. An ISA offers a huge 20k tax-free savings allowance that can be utilised by pension savers approaching their annual or lifetime allowance limits. It can also provide a flexible, tax-efficient income in retirement that is particularly useful for anyone at risk of tipping into a higher Income Tax bracket.
One of the benefits of a standard ISA is that it can be accessed at any time – you don’t have to wait until age 55 as with a pension. Nevertheless, funds held in an ISA are part of your estate and therefore potentially subject to 40% Inheritance Tax (IHT).
When it comes to long-term investing, Stocks and Shares ISAs can be a better option than a Cash ISA. Historically, stocks and shares have outperformed money in cash savings accounts. But that’s no guarantee they’ll do so in the future as investments can go down as well as up. If you are happy to risk losing money and can wait at least five years, a stocks & shares ISA is definitely worth considering. Despite this, Cash ISAs have typically accounted for 80% of ISA subscriptions every tax year, suggesting that most savers may not be making the most of the long-term opportunities on offer.

5) Save As You Earn (SAYE)

Company share schemes are a very popular way for employees to buy shares in the company that employs them and receive tax advantages at the same time. SAYE, which was introduced in 1980, is the most common type of company share scheme.
SAYE offers you the opportunity to take a direct stake in the company you work for. Money is deducted from your salary each month, and at the end of the term, you can exercise an option to buy company shares at a price that was fixed at the outset – usually at a 20% discount on their original value. The big attraction here is that if the share price has fallen, you get your money back – plus a tax-free bonus. It’s a win-win.
Anyone who contributes to a SAYE scheme has the option of carrying out an ‘in specie’ transfer of the shares directly into an ISA. Provided this is done within a 90-day time frame, there is no tax liability. Company shares that continue to be held outside of an ISA wrapper will be liable for Income Tax and Capital Gains Tax.

6) Lifetime ISA (LISA)

The LISA was introduced in April last year in response to the financial challenges facing younger generations. A LISA adds a 25% bonus to everything you save up to £4,000 annually. People aged 18-39 can open a LISA and save into it until they are 50. The rules are that the savings must be used for a deposit on a first home or a retirement pot accessible only after age 60. Withdrawals for other reasons are subject to a 25% penalty.
The LISA is a fantastic option for those looking to buy their first home, but we would not advise using a LISA instead of a pension. The LISA is useful for the few who exhaust their pension allowances and are unable to benefit from any further employer contributions. Most people will still be better off saving for retirement via their workplace pension. This is because contributions not only attract tax relief but also benefit from the all-important employer top up.
So, if you are under 40 and relatively sure you will use up your annual pension allowance in the future, opening a LISA, in case you want to add to it later, could be a very sensible move.

When Should I Start Investing?

If you have exhausted your pension allowances, you may wish to consider one or more of the options we have discussed. The key is to balance the benefits of a pension with the flexibility of different investments as part of a portfolio to meet long-term growth and income requirements. To do this effectively, you should always take expert financial advice.