More than half of UK pension savers are also building up retirement savings outside their pension, according to a MoneyAge article (22 December 2025). As pensions provide some useful benefits when saving for retirement, these savers could be missing out.
The survey found that people saving for retirement outside a pension were using a mix of cash savings, Stocks and Shares ISA, buy-to-let property, and other investments with the aim of building long-term wealth.
For some people, these options could be appropriate for their financial circumstances and retirement goals. However, they might also have overlooked the benefits of using a pension.
1. Your employer will contribute to your pension
If you’re an employee aged over 22 earning more than £10,000 a year, your employer must auto-enrol you into a pension. If you don’t opt out, your employer will need to contribute to your pension on your behalf at a minimum rate of 3% of your pensionable earnings, though they may contribute a higher percentage.
Should you choose not to save through a workplace pension, you’ll miss out on this additional money that could support you in retirement.
2. Pension contributions benefit from tax relief
To encourage workers to save for retirement, the government offers tax relief on pension contributions. In effect, this means some of the money you’ve paid in Income Tax is added to your retirement savings.
Pension tax relief is provided at your marginal tax rate. Usually, the basic rate is automatically added by your pension provider, and you can use a Self Assessment tax return to claim the remaining amount if you’re a higher- or additional-rate taxpayer.
In 2026/27, the amount you can contribute to a pension without facing a charge is usually £60,000 (the Annual Allowance) or 100% of your annual earnings, whichever is lower. If you’ve already taken an income from your pension or you’re a high earner, your pension Annual Allowance could be as low as £10,000.
It’s important to note that tax relief and other allowances may be dependent on your personanal circumstances and are subject to change.
3. Your pension is usually invested
The MoneyAge article notes that people are twice as likely to save for retirement in cash (43%) outside a pension compared to a Stocks and Shares ISA (21%).
While cash can be tempting to avoid exposure to investment risk, the interest from a savings account could be lower than investment returns. As many people save for retirement over a long-term time frame, low-yielding cash accounts could mean they retire with significantly smaller pots than they would have if they had invested.
Normally, the money you deposit into a pension will be invested with the aim of delivering long-term growth. While returns cannot be guaranteed and values may fall as well as rise, investing might provide an opportunity for growth that outpaces inflation or cash interest.
4. Investments held in a pension aren’t liable for Capital Gains Tax
When investments aren’t held in a tax-efficient wrapper, such as a pension, the gains you make when you dispose of them could be liable for Capital Gains Tax (CGT). As a result, a pension could be an effective way to invest for your retirement.
Again, tax liability may be affected by your personal circumstances and the tax regime may be subject to change in the future.
There are times when using a pension to save for retirement might not be the most appropriate option.
For example, if your financial circumstances could mean you need access to the money in the short or medium term, a pension would lock it away. As a result, you might feel more comfortable holding the money outside of a pension.
Alternatively, you can’t usually access your pension savings until you turn 55 (rising to 57 in 2028). So, if you’re hoping to retire sooner than that, you might need to establish savings outside of a pension to bridge the gap, however any structure outside of your pension would not attract tax relief.
Many people in retirement will draw from multiple sources to create an income stream that suits their needs and financial situation. Contributing to a pension doesn’t mean you can’t build retirement wealth elsewhere or vice versa.
If you’re unsure about your options for saving for retirement, please get in touch. We can assess if a pension might be right for you, as well as explore the alternatives.
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Workplace pensions are regulated by The Pensions Regulator.
