Panniers, definitely and the RIGHT PANNIERS at that.
1. they have to be Ortlieb as the fixing system is as easy as picking it up and putting it down, no faffing with any ties or elastic. If you have only used cheap ones before these are amazingly simple and effective, literately a fraction of a second on and off, totally secure and no bits to lose.
2. standard 40 litre touring panniers are much too big and flappy for commuting.
The answer is to use the orlieb sportpacker - excellent. Mine are 4 years old, used every day, totally waterproof and look almost new. A real investment - cheap panniers are a false economy. You also don't need 2kg of ugly metal either. A Tubus fly is 330g, ideal for commuting loads and very elegant.
I just feel so much freer with panniers, it isn't just a sweat thing, better for observation. I do use a rucksack on a mountainbike though, full suspension racks aren't very satisfactory, although you can turn a bike with an orlieb on upsidedown and shake it and it won't come off.
If not sure I buy the rucksack as protection thing either. Surely anything hard is going to cause a break or rupture if you fall on it as you get a point impact? I wouldn't like that between my spine and the hard road.