Women already face a wide pension gap – but you may have more money in your pot than you realise. These four tips can help you find your hidden money and assist you in the years ahead.
What would you do if you found £13,000 you didn’t know you had? You actually could be sitting on this much extra cash and not know it, as there are £20bn worth of unclaimed pension pots in the UK, averaging £13,000 each1. People change jobs and move homes so often that it’s easy to lose track of old pensions.
The thing is, if you’re a woman, you will certainly need that money. Why? The gender pension gap means your money needs to work even harder in the years leading up to retirement – by retirement age, the median pension wealth of women is about a third of men’s.2
Here are four tips to help you find any hidden money and fine-tune your retirement savings strategy.
1. Do a stock take
To ramp up your pension savings, you don’t necessarily have to save more (although it’s great if you can). You can make the money you already have work smarter and harder. Lots of us have numerous savings accounts and pensions scattered about, and there’s nothing wrong with this as long as they are all building wealth for you. To find out if they are, start by doing an inventory of all your assets and savings. Brainstorm everything you can think of – you could even draw a diagram. Be sure to include your house, any ISAs, current and old workplace or personal pensions, and things like Premium Bonds.
2. Track down lost pots
With people working an average of 11 jobs in their lifetimes3, many of us will have a few forgotten workplace pensions. The government has a free pension tracing service that can help you track down pension pots you may have from previous jobs. Once you’ve found everything, look at where your money is invested. You may have a pension pot from 10 years ago that was growing back then but is now dragging its feet. Your financial goals may have moved on, and you might feel differently about risk. You might still be paying fees and charges on multiple pension pots to which you are no longer contributing. All of this can be costing you money. It’s also a good idea to speak to a financial adviser to check that you’re making the most of the pension allowances you’re entitled to.
3. Consider your cash
Look at any cash savings you’ve got. The interest rates on savings accounts with a commercial bank are linked to the main interest rate set by the Bank of England. This is currently at a record low of almost zero, which means cash savings are earning virtually nothing. Worse than that, your cash savings may be losing value over time because of the effects of inflation, where the cost of buying everyday items goes up over time. For example, goods and services that cost £100 in 2010 cost £129 in 2019, because inflation has averaged 2.9% a year over that time4. So unless your cash savings have earned more than 2.9% a year in interest over the last ten years, the real value of your savings – its purchasing power – will be lower today than it was a decade ago.
4. Mind the gap
As well as gathering information about your existing savings, check your entitlement to the State Pension. This isn’t something you can take for granted – if you’ve taken a career break, parental leave or time out to care for elderly relatives, or been self-employed, you may have gaps in your National Insurance contribution record. If you haven’t made enough National Insurance payments, you won’t qualify for the full State Pension. If you’ve missed any, you can top them up with voluntary contributions, but the danger is leaving it too late to catch up, as you can usually only top up for the last six years. The State Pension is incredibly valuable (currently £9,100 for the 2020/21 tax year), and makes up the cornerstone of most people’s retirement income, so make sure you don’t miss out. You can check your National Insurance record on the government’s website.
Women will face a significant gender pension gap when they reach retirement age. McGrady Financial Services Ltd can help you take stock of your existing assets and pension savings so you can start closing that gap.
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1 Lost pensions: what’s the scale and impact?, Pensions Policy Institute, 2018
2 Understanding the Gender Pensions Gap, Pensions Policy Institute, 2019
3 Lost pensions: what’s the scale and impact?, Pensions Policy Institute, 2018
4 Bank of England inflation calculator
Source of Article: https://www.sjp.co.uk/news/how-to-unlock-your-hidden-pension-pots