I’m 49 – here’s how I’m aiming for a £1m pension pot by the time I retire

Sam Smith, 49, believes he is on track to have £1m in pensions by the time he retires. The father of one would like to retire before he is eligible to receive a state pension but is not certain this will happen. Sam has had multiple jobs over the years and has had many pension pots, which he has now combined into one £200,000 pot. He started his career as a graphic designer at a financial institution, earning £16,000 a year. Sam said the small sum he had in a pension with the institution was refunded to him in cash when he left to start a new career. “I hadn’t contributed for long enough to mandate it being stored as a pension”, Sam told The i Paper. Shorts After spending nights and weekends learning new skills, Sam switched careers to become a software engineer in 2001. Sam left the firm where he worked as a software engineer to set up and run his own business designing websites and providing digital services. Via the business, he typically took a salary and dividends totalling £100,000 annually. While running his business, Sam set up a stakeholder pension in 2004. A stakeholder pension is a type of defined contribution pension, which has a retirement value based on the amount paid in and how the investments perform over time. Sam said: “I only made contributions of £100 a month to the stakeholder pension. Retirement seemed like a long way off and while I knew I should be saving and making provisions, it was hard to compromise in the moment for the long-term.” Sam added money to his stakeholder pension for more than 20 years and its value is now around £60,000. Sam ran his business for more than a decade before winding it down in 2013 when he divorced. He said: “I had a lot of savings when I divorced, so I used them to buy a four-bed, semi-detached house. My mortgage is £2,100 a month and I will pay it off before I retire.” Sam has also worked as a visiting lecturer for a local college, teaching multimedia design. As a result, he contributed to a Scottish teachers’ pension for a number of years. In the interim, Sam worked as a designer or developer contractor for firms like Amazon and institutions like the NHS and universities. He typically earned £110,000 a year and always contributed to the available pension schemes. Sam now works as a digital services user experience director for a large financial institution in the UK. He manages teams of software designers and developers building new customer tools like apps and websites and, before tax and pension deductions, earns £145,000 a year. This is before bonuses and share options are factored in. He adds 6 per cent of his monthly pay to his workplace pension, while his employer contributes 15 per cent. After less than a year, his pension pot with the business is £24,000. He said: “If I stay in my current role, at my current salary, the mandated projections place this pension pot as being worth between £430,000 to £780,000 at state retirement age, in 18 years.” Sam recently consolidated all his previous pensions via the Penny app, including his stakeholder pension. He said: “The 12 pensions I consolidated with Penny are worth around £200,000 in total and will continue to accrue value. The consolidation process has generally been straightforward, but not in all cases. I’ve had to raise a complaint with one provider. As I get older, I will reduce the risk profile in my pension portfolio to achieve more stable returns ahead of divestment. “Taken together, my estimate is that I will be within touching distance of £1m in pensions at retirement age, assuming I remain in my current role, which is unlikely. I think £1m in pensions would give me a comfortable retirement, particularly if my mortgage is paid off.” Despite having a healthy amount of money tied up in pensions, Sam wished he had saved more in them when he was younger. “Even £20 a month extra would have helped”, he said. Sam would like to retire early but cannot see himself doing this much earlier than when he reaches state pension age. Sam added: “Could I survive on the state pension alone? Absolutely not. I can’t imagine how anyone can. It’s nowhere near enough. I think we spent decades undervaluing our pensioners, and the triple lock was designed to help ensure that this was resolved.” Will Lenehan, a director at Chartered Financial Planner at Life Plan Partners, told The i Paper: “Focusing on your pension early in your career can make an enormous difference to the retirement you achieve. The earlier you start, the longer your money has to benefit from investment growth and compounding, alongside employer contributions and pension tax relief.”