Money
Revealed: Britain’s biggest pension pot
The saver with the biggest pension pot in Britain has amassed £11m in retirement savings, it has emerged.
The pension pot, the details of which were obtained under a freedom of information request, is enough to generate an annual retirement income of £540,000, experts said.
Little is known about the saver who owns the large fortune, but analysis shows an 18-year-old starting work today would need to save nearly £50,000 a year, including tax relief, to build up a fund of £11m by the age of 68. This assumes a yearly return of 5pc.
The figures, obtained from the Office for National Statistics by wealth firm RBC Brewin Dolphin, also revealed more than 929,000 have accumulated pension pots valued at between £1-2m. Fewer than 50,000 have accrued more than £3m.
The data included both defined contribution and defined benefit pensions, using modelling to predict the equivalent pot size for the latter, which typically pay a specified amount based on someone’s final salary before retirement.
Rob Burgeman of the firm said: “Quite how this individual built up an incredible £11m pension we will never know, but good pension planning is something everyone should undertake regardless of income.
“These days thanks to employer contributions and auto-enrolment, it’s possible for people even on modest incomes to reach millionaires’ row by the time they retire.
“Someone entering the workforce today aged 18 and paying £389 a month into their pension could reasonably expect to retire with a £1m pot aged 68 assuming annualised returns of 5pc after fees.
“By the time they’ve clocked up 40 years in the workforce, they could be sitting pretty on a retirement fund of £577,990 based on contributions of just £186,720.
“But it’s in the last decade before retirement that the millionaire jackpot finally becomes a reality. After 50 years, the pot could well have smashed through the seven-figure mark on contributions of just £233,400.”
To be amongst the top 10pc of retirement savers, pension wealth of £374,500 is required, according to the ONS statistics.
The top decile of pension wealth is heavily skewed towards men, with just 34pc of the relevant pots owned by women.
A saver looking for a comfortable retirement will need at least £37,300 a year, meaning they will need to accrue £630,000 in today’s money.
It comes as the lifetime limit on tax-free pension saving, known as the lifetime allowance, is due to be abolished, with experts predicting the move will galvanise further retirement saving.
At the same time, the Government plans to reduce the age of pension auto-enrolment from 22 to 18, to encourage people to save for their retirement as soon as they enter the workforce.
Tom Selby, of broker AJ Bell, said retirees with large pots would benefit from the changes, which previously “reduced the incentive to save” and “punished strong investment performance”.
Untouched pensions also benefit from exemptions from inheritance tax, which is charged at 40pc.
Mr Selby added: “One of the big tax benefits for savers with very large pensions as a result of those changes is that more pension wealth can now be passed down the generations tax efficiently.”
The annual tax-free allowance for pension contributions was also increased from £40,000 to £60,000 in April 2023. The Money Purchase Annual Allowance, which is how much pensioners can save once they have begun to take their pension, was increased to £10,000.
Previously, any savings that breached the Lifetime Allowance of £1,073,100 were taxed at 55pc if the money was taken as a lump sum, or 25pc, on top of income tax, if taken out gradually.
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