The MoneySavingExpert founder says making mistakes with pension pots can be costly in retirement and Britons can track long-forgotten savings for free.
Martin Lewis has given Brits valuable advice on how to get the most out of their pension – and avoid mistakes that could cost them thousands of dollars.
“It’s important to get them right, as small mistakes can cost you tens of thousands of pounds.”
The first tip Lewis has is to follow any pension you may have.
He said there is around £20 billion in pensions currently unclaimed in UK pension funds.
For example, this can happen when an employee changes jobs and forgets about their old pension.
The government has an online Retirement Tracing Service that can help keep track of old pensioneven though it’s temporarily crashing in the program.
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Lewis also advises Britons not to ditch their pensions in favor of other ways to put cash aside, such as savings.
While saving is important, no savings deal can beat the return a pension gets, he said.
Lewis added: “Now that’s there like it. Savings don’t come close. In general, you’d be much better off using a pension plan.”
Since 2012, UK workplaces have automatically enrolled their employees in a private pension.
Employers must automatically enroll UK employees earning more than £10.00 a year and between 22 and state pension age, currently 66.
Under automatic registrationemployees must save at least 8% of salary a year into pension.
Usually, part of this comes from the workers’ own wages and part from their employers.
So if a worker puts 5%, their employer will add another 3%.
These workers can opt out of these plans, but Lewis recommends they don’t unless they have no other choice.
“My big message is this: opt out and you are effectively giving up a raise,” he said.
That’s because, when workers save into a pension, what they contribute is not taxed until they come to withdraw it – by which time that amount should have increased significantly.
Lewis also says that pension consolidation could help workers keep track of multiple pots – and help save money on annual fees.
But he said anyone doing this should beware of scammers, who pretend to offer consolidation services to get retirement cash.
“A really important warning – if you’re sitting at home and someone is calling for a merger, be extra careful because there are a lot of scammers out there,” he said.
https://www.mirror.co.uk/money/martin-lewis-explains-how-tens-26256980 Martin Lewis explains how to earn tens of thousands of extra pounds in retirement