Building a £1 million pension pot may be more achievable than you think. With smart planning and consistent contributions over time, being a pension millionaire could be well within reach.
Starting early - and benefitting from tax relief, employer contributions, compound interest and investment growth - could help you build up a substantial pot by the time you reach retirement. Although you can choose when to retire, you can’t typically access a defined contribution pension (which most private or workplace pensions are) until at least age 55 (rising to 57 from 2028).
A £1 million pension pot could give you an income of £40,000 a year in retirement – or around £52,000 a year if you include the full new State Pension which is currently £11,973 per year (2025/26). You can currently receive your State Pension, if you’re eligible from age 66 (rising to 67 from 2028). This assumes you’d withdraw 4% a year from a defined contribution pension from age 65, which should last until age 100.
So how do you build a £1 million pension pot?
How much to pay in for a £1 million pension
The earlier you start saving, the longer your money has to grow and benefit from compound interest. This is where your money earns interest on top of the interest already earned.
Having said that, it’s never too late to start paying into a pension. Any amount you can afford to put in has the opportunity to grow over time due to the power of compound interest. Plus, pension contributions also benefit from tax relief from the government.
The table below shows how much you’d need to contribute from different ages to reach the £1 million pension goal at age 65.
| Starting age | Monthly contribution | End pot value |
|---|---|---|
| 20 | £1,150 | £1,075,282 |
| 25 | £1,300 | £1,036,897 |
| 30 | £1,500 | £1,005,683 |
| 35 | £1,850 | £1,022,410 |
| 40 | £2,300 | £1,019,740 |
| 45 | £2,950 | £1,008,393 |
| 50 | £4,050 | £1,001,727 |
The calculations above are taken from PensionBee’s Pension Calculator and assume a retirement starting age of 65, an annual retirement income of £40,000 that lasts until roughly age 96. The calculations also assume you’re starting with no pension savings, don’t take the 25% tax-free lump sum and aren’t including any State Pension entitlement.
How to reduce the cost to you
There’s no denying that the amounts listed above are high. But the actual cost to you could be much lower once tax relief and employer contributions are taken into account. Most UK taxpayers get tax relief on their personal pension contributions. Basic rate taxpayers usually get a 20% top up so HMRC adds £20 for every £80 you pay into your pension, making it £100. Higher and additional rate taxpayers may be able to claim more through a Self-Assessment tax return. Note that tax rates differ in Scotland and you may be able to claim higher tax relief.
If you pay into a workplace pension, you may also benefit from employer contributions. Under Auto-Enrolment rules, if you work in the UK, are older than 22 years old and earn more than £10,000 per year, you’ll be automatically enrolled into a workplace scheme. However, if you ask to join, your employer will be unable to refuse you and must make contributions on your behalf.
If you’re eligible for Auto-Enrolment, at least 5% of your qualifying earnings will be paid into a pension. Your employer then has to pay a minimum of 3% of your qualifying earnings in. However, many employers will be more generous than this and some may even increase or match your contributions.
As an example, say you earn £60,000 a year. You opt to increase your employee contributions to 8% of your qualifying earnings and your employer matches this with another 8%, taking the total to 16%. This would mean £9,600 is going into your pension each year. But thanks to tax relief and employer contributions, the actual cost to you is only £2,880.
If you’re aged 35 and have £9,600 going in a year, it could be worth £442,124 after 30 years, assuming typical investment growth of 5%. This would give you a rough income of £16,400 a year in retirement. Adding in the full new State Pension, currently £11,973 a year (2025/26), would take your total retirement income to £28,373.
This table below explains how tax relief and employer contributions reduces the cost to you. Tax relief is added by HMRC at either 20% or 40% (depending on whether you’re a basic or higher/additional rate tax payer) of a gross contribution.
| Personal contribution of 8% | Tax relief | Total going in with employer contributions of 8% | Effective cost to you | |
|---|---|---|---|---|
| Earnings of £30,000 a year | £2,400 | £480* | £4,800 | £1,920 |
| Earnings of £40,000 a year | £3,200 | £640* | £6,400 | £2,560 |
| Earnings of £50,000 a year | £4,000 | £800* | £8,000 | £3,200 |
| Earnings of £60,000 a year | £4,800 | £1,920** | £9,600 | £2,880 |
| Earnings of £70,000 a year | £5,600 | £2,240** | £11,200 | £3,360 |
| Earnings of £80,000 a year | £6,400 | £2,560** | £12,800 | £3,840 |
*Tax relief at 20% (basic rate taxpayers)
**Tax relief at 40% (higher and additional rate taxpayers)
Increase your contributions over time
Paying into a pension while you’re young is a great start. But as you grow older, your salary will probably grow too. Consider increasing the percentage amount if you can afford to, in line with your salary growth. Doing this as soon as you get a pay rise will be easier than increasing it after you’ve gotten used to having more expendable income to play with. Likewise if you receive a sum of money - this could be a bonus or an inheritance - consider paying this into your pension to boost your contributions.
Additionally, increasing the amount you pay into your pension over time will help offset the effects of inflation. You can use PensionBee’s Inflation Calculator to see how your pension could be affected by inflation over time.
Income from a £1 million pension pot
Financial advisers typically suggest withdrawing 4% a year from your pension pot. This rule is designed to last around 30 years and reduces the risk of running out of money if you live a long life in retirement. This calculator from the Office for National Statistics (ONS) shows your chances of living to 100.
Withdrawing 4% of a £1 million pension pot would give you an annual income of £40,000. This rises to £51,973 if you include the annual income from the full new State Pension (2025/26). You may think this is far higher than your needs. Only you know how much you need to live on. To give you an idea, the Pensions and Lifetime Savings Association (PLSA) have developed the Retirement Living Standards. These show retirement incomes at three different levels (minimum, moderate and maximum) for single people and couples. They can help visualise what your lifestyle could look like for example, if you could afford to run a car or holiday abroad.
With an annual income of £51,973 (thanks to your £1 million pension and full new State Pension entitlement (2025/26), a single person would sit above the comfortable standard of £43,100.
It’s important to bear in mind that the first 25% of your pension can be withdrawn tax-free. After that, your withdrawals will then be subject to income tax for amounts above the £12,570 personal allowance (2025/26).
To help you figure out how much you could have in retirement, and how much you’ll need to pay into your pension now, use PensionBee’s Pension Calculator.
Elizabeth Anderson is a Personal Finance Journalist and Editor (Times Money, Telegraph, Metro and i paper).
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
