It’s a way of earning ‘interest-on-interest' on your savings. Put simply, that means the interest you earn on your savings, starts earning interest too!
This interest-on-interest can make a big difference to how much your savings are worth over the long term.
For example, someone who starts saving at the age of 21 and then stops at 30 could end up with a bigger pension pot when they retire, than someone who starts saving at 30 and doesn’t stop until their retirement.
Or alternatively, think about compound interest like a snowball. The longer a snowball rolls downhill, the bigger it gets. The further down the hill you start rolling, the harder it is to catch up.
Your pension works on compound interest. This means the younger you start saving into it, the more power it has to grow.
"My Workplace Pension is brilliant because sed do eiusmod tempor incididunt ut labore et dolore liqua."
Marcus, 18, Student
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