In a recent study, data on both defined contribution and defined benefit pensions was analyzed to predict the potential size of retirement funds. The study found that even individuals with modest incomes have the opportunity to accumulate significant wealth through pension planning and employer contributions.
A spokesperson for the firm stated, “We may never understand how this particular individual managed to amass an astonishing £11 million pension. However, it is essential for everyone, regardless of income, to prioritize pension planning.”
According to experts, a person who starts contributing £389 per month to their pension at the age of 18 can reasonably expect to retire with a £1 million fund at the age of 68, assuming an annual return of 5% after fees. Even with contributions totaling just £186,720 over 40 years of work, they could potentially have a retirement fund of £577,990.
Interestingly, it is in the last decade before retirement that the possibility of becoming a retirement millionaire becomes more realistic. After 50 years of contributions totaling just £233,400, the retirement fund could exceed the seven-figure mark.
According to statistics from the Office for National Statistics (ONS), individuals within the top 10% of retirement savers hold a pension wealth of at least £374,500. However, it is worth noting that these figures are heavily skewed towards men, as only 34% of the top pensions belong to women.
For those seeking a comfortable retirement, it is estimated that £37,300 per year is needed, equivalent to a retirement fund of around £630,000.
The abolition of the lifetime allowance on tax-free pension savings, coupled with the government’s plan to lower the age of pension auto-enrollment from 22 to 18, is expected to further encourage individuals to save for retirement from an early stage in their careers.
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