6 ISSUES FOR JUST £6 Subscribe to Business & Professional Life today CLICK HERE

How to build a £1million pension in your 50s

PUBLISHED: 16:23 04 September 2018 | UPDATED: 16:23 04 September 2018

(c) monkeybusinessimages / Getty Images

(c) monkeybusinessimages / Getty Images


Investment expert Brewin Dolphin, which has an office in Cheltenham, shows you how to build up a significant nest egg, even in your 50s

People in their 50s could be forgiven for thinking they have left it too late to build up a decent pension; conventional wisdom says it takes a lifetime of contributions to build a sufficient fund for retirement.

But thanks to generous allowances and tax relief on pensions, and tax-efficient Individual Savings Accounts (ISAs), a determined saver aged 50 could build up a retirement pot of almost £1m by the age of 67, according to research by Brewin Dolphin.

The strategy requires saving relatively large amounts of money each year, but people in their late 40s and 50s are best placed to afford it; the mortgage is usually paid off and children flown the nest, leaving this age group with more disposable income than at any other time in their lives.

“Of course, you should start saving as early as you can for your retirement, but many people don’t pay adequate attention to their finances until later in life, when the prospect of retirement is looming large” says Liz Alley, divisional director at Brewin Dolphin.

“The good news is that it’s not too late, as long as the government keeps pension contribution limits and tax relief at current levels.”

Currently the maximum you can pay into a pension each year is the lower of relevant earnings or £40,000. This may sound an enormous amount to put aside from your income. But thanks to the way tax relief works, each £100 contribution only costs a higher-rate taxpayer £60. It would therefore cost £27,000 to add £40,000 to your pension pot. A basic-rate taxpayer who is taxed at 20% would need to spend £32,000 to hit the £40,000 target.

Assuming £40,000 is invested each year and achieves investment growth of 4% a year, the pension would grow to almost a million pounds after 17 years; £985,816 to be precise. The figure assumes modest investment growth of 4% per annum.

Somebody earning a gross £70,000 a year takes home £4,052 a month, making it quite feasible to save just over £2,000 a month if there are no child-related costs or mortgage payments. Indeed, if investment growth is just a little higher, at 5%, the pension would grow to £1,085,000, which breaches the lifetime allowance of £1,030,000 – the maximum amount you can accumulate in a pension without triggering a punitive tax charge, so it may be necessary to save less to ensure you do not go over the limit.

However, people should not waste any time in making use of the pension tax breaks because there is constant talk of paring back the tax benefits.

“People need to take advantage of pension tax relief while it is still available,” says Alley. “There are rumours that the government is considering removing higher-rate tax relief and introducing a flat rate at a lower level, which would make pension saving more expensive for higher earners. I would urge everybody to utilise these generous allowances while they are still in place.”

Those with higher earnings could also take advantage of the annual ISA allowance, set at £20,000 for the 2018/19 tax year, which would, if fully utilised over the same period of 17 years, produce a total fund of £492,908, assuming the same annual growth of 4%. The ISA pot is made up of £360,000 in contributions and £133,000 of investment growth.

Although ISAs have grown in popularity in recent years, it is pensions that provide the more generous tax reliefs. The government effectively refunds any tax you have paid on your contributions at your highest rate. Although withdrawals are taxed, pensions are not counted in your estate for inheritance tax purposes so can be passed down to beneficiaries tax free.

Contributions to ISAs on the other hand receive no tax relief although withdrawals are free from income tax.

The value of investments and any income from them can fall and you may get back less than you invested.

Please note that this document was prepared as a general guide only and does not constitute tax or legal advice. While we believe it to be correct at the time of writing, Brewin Dolphin is not a tax adviser and tax law is subject to frequent change. Tax treatment depends on your individual circumstances; therefore you should not rely on this information without seeking professional advice from a qualified tax adviser.

No investment is suitable in all cases and if you have any doubts as to an investment’s suitability then you should contact Brewin Dolphin. Visit www.brewin.co.uk or brewin.co.uk/our-offices/cheltenham/.


Welcome , please leave your message below.

Optional - JPG files only
Optional - MP3 files only
Optional - 3GP, AVI, MOV, MPG or WMV files

Please log in to leave a comment and share your views with other Cotswold Life visitors.

We enable people to post comments with the aim of encouraging open debate.

Only people who register and sign up to our terms and conditions can post comments. These terms and conditions explain our house rules and legal guidelines.

Comments are not edited by Cotswold Life staff prior to publication but may be automatically filtered.

If you have a complaint about a comment please contact us by clicking on the Report This Comment button next to the comment.

Not a member yet?

Register to create your own unique Cotswold Life account for free.

Signing up is free, quick and easy and offers you the chance to add comments, personalise the site with local information picked just for you, and more.

Sign up now

More from Cotswold Life

Fri, 09:54

Celebrating the region’s successes in engineering, manufacturing and innovation, our worthy winners of the fourth annual Cotswold Life EMI Awards were announced at a glittering black-tie ceremony held at Cheltenham Racecourse

Read more
Wed, 16:14

Tracy Spiers takes Emily, daughter number two, who shares her love for anything historical, to this vibrant place and get lost in a heady mix of wild bears, Middle Age punishing devices, timber-framed buildings and live bees

Read more
Wed, 15:29

When Charles Martell became the latest High Sheriff of Gloucestershire, he started discovering things about the county he never knew – not to mention things about himself, too. Katie Jarvis spoke to him about saw pits, walnuts, peaceable towns and pink-headed ducks

Read more
Wed, 15:10

We can’t complain about the glorious summer we’ve enjoyed in this Cotswolds this year, and it’s been especially welcomed at our annual village fairs. Our editor Mike Lowe suggests some light-hearted modifications of our centuries-old tradition...

Read more
Wed, 14:16

“Rosconn is a customer centric business where the needs of the landowner are put first.”

Read more
Wed, 10:21

Did you attend the C2S and SsangYong Launch Event? If so, you could be in our social photos!

Read more
Wed, 09:34

The Gloucestershire-based firm of Business Advisers and Chartered Accountants will share their expertise to help boost companies’ exports

Read more
Wed, 09:21

“Venturefest has been at the heart of our county’s innovation and entre-preneurial community for so long that we have to make sure we keep innovating our-selves to maintain interest and support. I think we achieved that this year in so many ways!”

Read more
Tue, 16:41

The weekend is fast approaching and for those still deciding how to spend their Friday through to Sunday, we pick 5 of the best ways to spend your weekend in the Cotswolds

Read more
Tue, 16:18

The former Royal Mail sorting office in Oxford, renamed OxBox is to be given a new lease of life after being taken over by a rapidly expanding biotech company

Read more
Tue, 16:10

The UK’s growth index is at its highest level since 2005. Lucy Parford uncovers the companies behind the upturn

Read more
Tue, 11:59

The event will take place on Wednesday November 7 2018 at Hatherley Manor Hotel

Read more

Whether you’re thinking of keeping a couple of goats as pets or rearing a small herd for milking or meat production, Lizzie Dyer of Just Kidding can tell you everything you could possibly want to know about these idiosyncratic creatures

Read more
Mon, 16:39

St Mary de Crypt Church and the Old Crypt Schoolroom in Gloucester produced two world famous Christian leaders, schooled ‘Long John Silver’, and is the burial place of ‘Ebenezer Scrooge’

Read more

Newsletter Sign Up

Sign up to the following newsletters:

Sign up to receive our regular email newsletter

Our Privacy Policy

Latest Competitions & Offers

Topics of Interest

Food and Drink Directory A+ Education

Subscribe or buy a mag today

subscription ad

Local Business Directory

Property Search