How to build a £1 million pension pot

See what it takes and how starting early can make a big difference.

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A £1 million pension pot is a milestone that many people aim for.

It’s a level of savings that could give you the freedom to make more choices in retirement, whether that’s drawing a comfortable income, helping family or simply having more financial breathing room.

In this guide, we look at what it could take to reach that goal by age 65, and how much income a pot of that size might realistically give you.

All the figures assume your pension pot grows at an average annual rate of 5% after fees. While that’s not guaranteed, it’s a reasonable benchmark for planning purposes. 

It’s also important to remember that investing comes with risk, and you could get back less than you invest. 

Quick read: what it takes to reach £1 million.

Only have a minute? Here are the key points from this guide:

01

A £1 million pension doesn’t have to be a dream.

It could provide £34,000 a year after tax from drawdown, or £41,000 from a pension annuity.*


*Annuity quote provided by JUST, June-2025. Drawdown figure calculated using Voyant. 

02

Start early and contribute regularly. Starting later? You’re not out of options.

At 25, saving £1,608 (gross) per month into your pension pot, could be enough. But this figure increases to £2,293 (gross) for a 35-year-old, and to £3,659 (gross) for a 45-year-old. (Assuming pension contributions are increased by inflation each year, and an investment growth of 5% per annum.). 

03

There are simple ways to potentially boost your pension pot.

Use salary sacrifice, pay in bonuses, take more investment risk early on and review your pensions regularly.

Ready to make a plan? Let’s talk

01

A £1 million pension doesn’t have to be a dream

What could a £1 million pension pot give you from age 65? Drawdown.


If you start drawing income from your pension at age 65, the amount you take will depend on your goals, your withdrawal rate and the performance of the market.

Based on our modelling, we estimate that you could withdraw £37,500 per annum (increasing in line with inflation) from age 65. This would exhaust your fund by around age 95, assuming your investments continue to grow at 5% annually after fees. A basic-rate taxpayer would take home around £34,389, while a higher-rate taxpayer would take home £31,278.

This information is based on our current understanding of HMRC tax rules in the UK. Tax treatment depends on individual circumstances which could change in the future.

Please note that the after-tax figures account for the fact that 25% of pension withdrawals are tax-free, subject to an overall tax-free cap of £268,275. The tax-free cap is typically only a consideration when an individual’s pension pot exceeds £1,073,100. 

Using your pot over time (Drawdown)

What could a £1 million pension pot give you from age 65? Annuity.


An alternative to drawdown is to purchase a pension annuity.

A pension annuity is a product that pays you a regular guaranteed income for the rest of your life, no matter how long you live.

Based on current annuity rates* (as of 23/06/2025), a 65-year-old with a £1 million pension pot could purchase an annual income of £45,700, which would see a basic-rate taxpayer take home £41,359, and a higher-rate taxpayer take home £37,018.

*The annuity quote was run on a joint-life basis, with a 100% spousal benefit. The inflation rate used was 3.6% per annum.

Drawdown or annuity?


There are some key differences to consider between drawdown and annuities. 

Whether drawdown or annuity is right for you will depend on your circumstances, objectives and preferences. In some instances, a combination of the two can actually be the right outcome.

Choosing between the two is a very complex decision and one that typically requires the involvement of a financial planner.

Key differences between drawdown and annuity options

  Drawdown Annuity
Income Your income is not guaranteed. 
The value of your pension pot 
will be linked to investment 
performance.
Your income is guaranteed. You 
will receive an income for the 
remainder of your life.
Risk levels More risky than annuity.  Less risky than drawdown. 
Pension growth Pension pot can still grow.  Pension pot cannot grow.
Making withdrawals Withdrawals can be 
flexible, meaning they can be 
increased or decreased to suit 
lifestyle changes.
Withdrawals are not flexible, 
meaning the amount you 
receive will be consistent 
(except inflation-linked 
increases).
Impact of your health Your health will not affect 
the income you receive.
Your health will affect the 
income you receive. The less 
healthy you are, the higher 
the income.
Inheritance Beneficiaries can inherit a 
pension pot.
Beneficiaries have no pension 
pot to inherit.
Making changes Offers more flexibility. Once you purchase an 
annuity the decision is 
generally irreversible.

02

Start early and contribute regularly. Starting later? You’re not out of options

How much do you need to save and what will it really cost you?


Your age and tax-rate will have a significant impact on the amount you need to save.

Why starting early makes such a difference.


One of the biggest advantages of starting in your 20s or 30s is time. The longer your savings have to grow, the less you need to contribute overall. As the table shows, a 25-year-old needs to put aside £1,608 per month to reach a pension pot of £1 million at 65. The amount needed to save each month increases by around £700 for a 35-year-old, and more than doubles for a 45-year-old! This highlights the importance of starting early when it comes to saving for retirement. 

Pensions tax relief.


A key benefit in saving into a pension is the tax-relief you get from the Government. This means that when you pay money into a pension, the income tax you have paid on that money is effectively returned to you via a top-up from HMRC.

Tax treatment depends on your individual circumstances and may be subject to change in future.

Contributions and growth rate.


We have assumed the contributions increase by 3.6% per annum, which is our assumption for inflation.

We have also assumed an investment growth rate of 5% per annum (net of fees).

Monthly contribution requirements based on age and tax rate

Age 25 35 45
Monthly gross 
contribution
£1,608 £2,293 £3,659
Cost to basic-rate taxpayer £1,287 £1,834 £2,928
Cost to higher-rate taxpayer £965 £1,376 £2,196
Cost to additional-rate taxpayer £885 £1,261 £2,013

03

There are simple ways to potentially boost your pot

Four smart ways to help you get there.

01

Use salary sacrifice.

You’ll save on income tax and national insurance, which means your pension gets more while it costs you less.

02

Pay in bonuses.

Instead of paying tax and national insurance on your bonus, you can add some or all of it to your pension.

03

Take more investment risk if you can.

If you’ve got more than 10 years before retirement, you may benefit from higher-risk investments. Just be sure to review your approach regularly.

04

Check fees and fund performance.

High charges and underperforming funds can drag you down. A pension review could uncover better options.

One of the biggest advantages of starting in your 20s or 30s is time.

A graphic of the various retirement guides from Rathbones sat next to one another

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