It is becoming increasingly common to have multiple jobs and careers over the course of your working life. This can often mean that you also have multiple pension pots, and these can be tricky to keep track of. This could mean that you have forgotten savings that are just waiting to be found.
Jamie Smith-Thompson, Managing Director of pensions advice specialists, Portafina, highlights ways to discover whether you could have piles of forgotten money and explains the reasons why it’s a good idea to find out:
‘The first and most obvious way to begin tracking down those potential lost pounds is to contact previous employers and check if there are any savings in those pension schemes.
Another way of finding forgotten pensions, and particularly older ones, is through a pension review. Not only can it help uncover more savings than you think, it can also let you know where you stand with your future. With rising living costs, a lot of people are finding it increasingly difficult to save, so knowing where you are now means that you’ll have a clearer idea of what you actually have now and what you’ll need for your future.
There’s no doubt that finding a forgotten pension could be seen as a bonus. Yet, having multiple separate pots isn’t really the most efficient way of ensuring your money will grow. Any one of them might not be performing as well as it could be, especially if there are high charges attached. A review could help you to enjoy the benefits of a low charging, highly efficient pension, meaning that your money is working as hard as it can for you. If you speak to a financial adviser, they should be able to explain clearly what savings you have so far for your future and what steps you need to take next.
Pensions are a great way to save for your future because of the benefits attached to them. For example, a huge perk of a workplace pension is that your employer must contribute too, which is essentially free money for you.
Every time you pay into your pension, you are rewarded with an instant savings boost, called tax relief. If you’re a basic-rate tax payer, when you contribute to your pension the government adds back the 20% that is usually deducted from your earnings. For example, if you add £80 to your pension, the government will top this up to £100. Higher and additional rate tax payers can also claim back the extra 20% or 25% they pay in income tax.
Saving into a pension also means you’ll get to enjoy the power of compound interest. And it works like this: when you save money, it will generally earn interest. That interest will then earn interest itself. And to harness that power, it’s essential that you start saving as early as possible.
If you make the most of this and the tax relief in your pension, it could mean the difference between just getting by in the future and having a multitude of opportunities.’