Pension contributions: How YOU could build a £56,100 pension pot by age 65 in 20 years

With the full new state pension amount currently valued at £168.80 per week, those eligible may be able to claim the maximum £8,777.60 per year once they reach their new state pension age. However, many people will supplement this with a private pension – such as a workplace pension or a personal pension. According to a new study by Aviva, 8.9 million employees aged 45 or older (64 per cent) do not know how much they will need to save for a comfortable retirement. Meanwhile, 5.1 million (37 per cent) do not know how much they have already saved in their pension, the figures show.

The study, which looked in to mid-life employees’ financial preparedness for later life, included research from 1,036 UK employers, and 2,020 employees aged 45 or older.

According to the analysis, two in five respondents (43 per cent) said they were unaware of how much support they would get from the government via state pension support.

What’s more, a further 26 per cent of those asked said they did not know the age at which they would qualify for the state pension.

It is possible to check one’s state pension forecast online, using the government tool.

While the statistics may suggest many of the respondents are unaware about how prepared they are for retirement, Aviva said the analysis also highlighted that there is still time for plenty of people to save.

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Based on the average UK salary of £28,000, Aviva calculated how much a person with no pension savings at 45 or older could amass by the age of 65.

The projected figures are based on the current minimum employee and employer pension contributions under auto-enrolment alone (a combined 8 per cent of annual pensionable earnings) – which are based on assumed charges and rates of growth (of 2.4 per cent), which are not guaranteed.

Starting age of 45

Should a person begin making pension contributions at the age of 45, according to Aviva, by the time they reach their 65th birthday, their pension savings could have a projected value of £56,100

Should their employer have made three per cent contributions of annual pensionable earnings, this would amount to contributions of £13,200.

Meanwhile, if they make five per cent contributions, the amount saved would reach £21,840.

Starting age of 50

Assuming the aforementioned employee and employer contributions of five per cent and three per cent respectively, a person at the starting age of 50 could result in a projected value of £39,600 in pension savings by 65, Aviva said.

The amount saved by the employee would stand at £16,380 in this situation, Aviva said, while the employer’s contributions would be £9,900.

Starting age of 55

Those who begin saving into a workplace pension pot at the five per cent rate will save £10,920 in the 10 years, according to Aviva’s projections.

Meanwhile, the employer’s £6,600 worth of pension contributions will help boost the savings, to a projected value of £25,500 in pension savings by the age of 65.

Starting age of 60

With five years to go until their 65th birthday, a person at 65 could end up with a projected value of pension savings of £13,600.

This works out at £5,460 being saved by the employee, while the employer would make £3,300 in pension contributions, assuming the above contribution percentages.

Lindsey Rix, Managing Director of Savings and Retirement at Aviva said: “Millions of mid-life employees are flying blind, and fast, towards their retirement.

“At the same time these employees are calling upon their employers for help.

“Without a clear picture of what they currently have saved or might need to save for a comfortable retirement, our findings show many UK employees are approaching retirement with their eyes closed – with no realistic idea of how near or far they are from their destination.

“As a first step, mid-life employees who are mystified by their pension savings should try to get a clear picture of what they have saved so far and how much of an income this can provide them with over the course of retirement.

“For some, this may be a pleasant surprise, while for others, it could be the wake-up call that’s needed to spur them to take action.

“People whose pensions are in need of a boost shouldn’t be disheartened, however, as it’s never too late to save.

“At Aviva we’ve launched a Mid-Life MOT for our people aged 45 and over to offer them guidance on their wealth, along with their work and wellbeing needs.

“Mid-life employees are the fastest growing employee population in the UK by age, and we urge other employers up and down the country to consider introducing similar schemes to ensure they feel fully supported.”

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