Britons could bolster their pension pot post-retirement by £120,000 thanks to a useful savings hack, new research has found. According to wealth manager Murphy Wealth, setting aside just £208 each month into a pension could achieve exactly that within 15 years.
Recently, concerns have been raised about whether workers are saving enough for retirement, with recent research suggesting overall pension confidence remains low in the UK.
When an individual contributes £208.34 monthly, their employer adds a further £125 under auto-enrolment rules, while government tax relief at 20 per cent boosts the total to £416.67 per month.
Over a year, this amounts to £5,000 being invested, with the calculations based on six per cent annual growth and accumulating to more than £123,000 over the 15-year period.
How can you boost your pension by £120k?
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The wealth manager’s figures assume employer contributions equivalent to three-eighths of the monthly payment, reflecting the three per cent employer share within the eight per cent minimum total required through auto-enrolment.
It should be noted that some employers may contribute more if they match personal contributions pound for pound.
Murphy Wealth notes that the six per cent projected growth rate sits comfortably below the MSCI World Index’s 8.7 per cent average return over the past two decades, though costs vary between providers and are not factored into the calculations.
Pension savings of up to 25 per cent can be withdrawn as a tax-free lump sum, capped at £268,275, but remaining funds may be taxable as income depending on individual circumstances.
How much could you save? Pension pot | GBNAccess to private pensions currently begins at 55, though this rises to 57 from April 2028.
Those seeking immediate access to their full £120,000 without tax implications might consider ISA alternatives instead.
However, the timeline extends considerably without employer contributions or Government tax relief.
Putting the same £208.34 monthly into a stocks and shares ISA, assuming identical 6% annual growth, would take 23 years to reach the target, though returns fluctuate year to year.
At a two per cent average annual growth rate, which actually exceeds the 1.21 per cent average seen over the past decade, a cash ISA would require 34 years of identical contributions to hit £120,000.
Current ISA rules permit up to £20,000 annually in either stocks and shares or cash accounts, though from April 2027 the cash allocation will be restricted to £12,000.
Adrian Murphy, CEO of Murphy Wealth, said: “These figures underline the power of pensions as a long-term savings vehicle.
“Employer contributions and the tax relief provided by the Government can make a huge difference over time and take years off reaching the same target compared to other forms of saving at the extreme, potentially more than halving the timescales to reaching £120,000 on the same level of contributions.”
Rachel Reeves delivered the Budget in the Commons last year
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PAHe acknowledged that many are questioning pension effectiveness given forthcoming inheritance tax (IHT) changes and rising access ages, but maintained they remain the optimal route for building retirement wealth.
Mr Murphy also highlighted the stark performance gap between investments and cash, noting that stocks and shares have substantially outperformed cash across most timeframes.”
However, the UK is too faithful to cash, which means most people are missing out on better returns and that needs to change,” he added, urging savers to consult professional financial advisers.
Changes to the pension regime, including making retirement savings liable for IHT, are set to introduced next year under reforms outlined by Chancellor Rachel Reeves.
