A pension saver has accrued a whopping £11 million in pensions, according to a freedom of information request to the Office for National Statistics.
In addition, 46,000 investors have pension pots in excess of £3 million, while 128,000 have nest eggs worth between £2 million and £3 million.
The £11 million mega pot comes out to a possible annual income of £540,000 or £10,600 per week for the person whose identity is unknown, according to analysis by RBC Brewin Dolphin.
The average pensioner currently has a retirement income of £349 a week, or less than 4 per cent of what the mystery saver has accrued.
Unlocking pensions: More than 1 million savers have a pension pot worth more than £1 million, according to the FOI
Rob Burgeman, asset manager at RBC Brewin Dolphin, says the “incredible” pot is a lesson in good retirement planning that “everyone should follow, regardless of income.”
To hit the £11 million pot, RBC Brewin Dolphin estimates that an 18-year-old would need to put in £49,260 a year until they are 68.
Burgeman adds: ‘How this individual built up an incredible pension of £11 million we will never know.’
“Nowadays, thanks to employer contributions and automatic enrollment, it is possible for people with modest incomes to become millionaires by the time they retire.”
The ONS data, obtained through an FOI request from RBC Brewin Dolphin, also shows that around 1.1 million pension savers have pots worth more than £1 million.
To be in the top 10 per cent of private pension pots, the ONS data shows you need to save £374,000 or more.
The data shows that 66 percent of savers in the top 10 percent of retirement assets are men, while the bottom 50 percent of savers own only 1 percent of retirement assets.
But Burgeman pressed for hope, stating there is a possibility that even those on ‘modest incomes’ could reach £1million or more in savings.
“Someone who enters the workforce today at age 18 and pays £389 a month can reasonably expect to retire with a pot of £1 million at age 68, assuming an annual return of 5 per cent after deductions of costs.’
He says the key to getting these high amounts may be employer contributions and automatic enrollment in retirement plans.
He adds, “Building a war chest for retirement can seem extremely daunting at first, but money saved regularly over long periods of time can yield quite dramatic results, as the ONS data shows.
Whatever your income, there are a few powerful weapons in your arsenal that you should consider as you plan for retirement.
Taking advantage of tax credits is crucial: a base rate taxpayer who saves £80 of take-home pay into a pension will receive an additional £20 from HMRC, giving a total investment of £100 – or an immediate return of 20 per cent.
“As Paul Daniels used to say, ‘that’s magic.'”
Then there’s the mathematical phenomenon of compound interest, or interest on your interest.
‘If you take tax relief into account, a subscription of £100 a month actually costs an investor just £80 a month, bringing the total contributions after ten years to £9,600.
‘But as your pot grows, you will earn interest on your increased amount, meaning your pension assets could rise to £15,592, assuming a return of 5 per cent on an annual basis after costs.
“The miracle only gets bigger over a longer time horizon. Over 20 years, the same plan would more than double contributions of £19,200 to £41,274. Another decade and £28,800 could become £83,572. After 40 years contributions of £38,400 can rise to £153,237.
“There’s no question that the magic of compounding mixed with sound tax advice makes for an extraordinarily potent cocktail.”
Government is committed to pension reform
In March, the government backed a bill that would lower the automatic enrollment age for pensions to 18 instead of 22, meaning workers may start building up their pension pot from an earlier age – this could help create a larger private pension later in life .
Jeremy Hunt also announced in March that the government would abolish the lifetime benefit, meaning there would be no maximum amount a person could save tax-free into retirement.
If you want to keep more of your pension money without it being taxed, read our guide: Eight expert tips to keep your pension fund out of the hands of the tax authorities.
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