Lessons from the £11m pension saver ‒ how to build a better pension

As an FOI reveals the UK’s most successful pension saver has built an £11m pot for their retirement, we outline the tactics you need to follow to build your own retirement warchest.

Senior couple sitting in garden
(Image credit: Getty images)

We all aspire to enjoy a retirement of relative comfort, with a decent-sized pension pot so we don’t have to worry too much about money once we finish work. Few of us would ever dream of building a pot worth eight figures, yet that’s what one saver in the UK has managed.

The largest pension pot accrued by a current saver is worth a whopping £11m. That’s according to data from the Office for National Statistics (ONS), revealed following a Freedom of Information request from wealth manager BRC Brewin Dolphin.

That could entitle the saver to an annual income of around £540,000 over a retirement period of three decades, according to the firm.

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The figures collated last year by the ONS found that there are around 929,000 savers in the UK with pension wealth of between £1m and £2m, with a further 128,000 sitting on pensions worth between £2m and £3m. Around 46,000 investors have managed to build pension pots worth more than £3m. 

The data also revealed that to rank among the top 10% of retirement savers, you will need to build pension wealth of at least £374,500

How to become a pension millionaire

We don’t know the exact circumstances of the saver who built up the £11m pension pot, or how they managed to put together such a vast war chest to cover their retirement. 

However, there are certain approaches utilised by many of those who have managed to save pension pots worth over a million pounds. 

By bringing those tactics into your pension saving, you can boost the size of your own pot and ensure that you ensure the most comfortable retirement possible.

Start early with a pension

One of the simplest ways to boost your pension saving is simply to start as early as possible. The longer that your money is invested, the longer you can benefit from compound interest

The returns from the money invested initially will then be reinvested, over and over again, over the life of your pension. 

Essentially the size of your pot snowballs simply because of the longevity of the investments, even if you don’t always invest your pension money in the very best assets.

Pay in what you can

It can be easy to keep pension contributions to a minimum. After all, there are always plenty of other areas you might prefer to use your money with an immediate benefit, particularly at a time of rising housing costs and high inflation.

However, if you want to build a large pension pot you need to focus on the size of your contributions. Even a modest increase to your monthly payments could boost your eventual pension pot by tens of thousands of pounds.

What’s more, increases to the annual pension allowance have opened up the option for higher earners to reduce their tax burden by contributing more to their pension. 

Maximise employer contributions into your pension

A big factor in the size of your eventual pension pot is obviously how much money you pay into it each month. And that also means maximising employer pension contributions. 

Thanks to the government’s auto enrolment scheme, employers are required by law to open a pension and contribute towards it for eligible staff members. 

Under the current rules, employees must pay a minimum of 5% into workplace pensions in order to qualify for a minimum contribution of 3% from their employer. That’s effectively free money from your bosses, going towards ensuring you enjoy a more comfortable retirement. 

It’s also worth emphasising that these are just the minimum contribution levels ‒ some employers will be willing to make higher pension contributions as a further employment perk.

If you want to build the biggest possible pension pot, then it makes sense to get the absolute maximum in terms of employer contributions for as long as possible.

Get tax relief on your pension contributions

It’s not just your employer who will top up your pension contributions ‒ the government does too in the form of tax relief.

The relief added to your contributions is based on your income tax band, meaning that basic rate taxpayers get 20%, higher rate taxpayers get 40% and additional rate taxpayers get 45%.

It’s important to bear in mind that with the latter two, this higher rate of tax relief is not automatic. You will have to claim it manually each year, usually by submitting a self-assessment tax return. 

The additional tax relief will be paid into your bank account, so it’s up to you to transfer it into your pension pot. While this process is rather more fiddly than is ideal, the extra money could make a substantial difference to the size of your eventual pension pot.

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John Fitzsimons

John Fitzsimons has been writing about finance since 2007, and is a former editor of Mortgage Solutions and loveMONEY. Since going freelance in 2016 he has written for publications including The Sunday Times, The Mirror, The Sun, The Daily Mail and Forbes, and is committed to helping readers make more informed decisions about their money.