Savers could see their money grow into a £100,000 pension fund much quicker than they think.
Investing with a 5% a year return would need just a £60 a month contribution over 40 years to reach the magic number, say financial experts at pension giant Aegon.
And anyone in a typical workplace pension could save just half this amount because their contribution would be topped up by their employer and tax relief.
The company has even crunched the numbers for savers of different ages who might think they are too old to save £100,000 for their retirement.
Monthly contributions need to save £100,000
The firm says the age assumptions show how important allowing enough time to grow savings is.
A 20 year old wanting to build a £100,000 pot over 20 years would have to save £225 a month – more than four times as much as someone the same age putting aside £60 a month over 40 years.
Steven Cameron, pensions director at Aegon, said: “Many might think building up a savings fund of £100,000 is completely out of reach. But our analysis shows that provided you get into the savings habit early enough; it could be much more affordable than you might guess.
“For someone starting to save in their 20s, an initial monthly investment of as little as £60, rising with inflation and with investment growth of 5%, could produce £100k after 40 years. And if that same individual is contributing just half this, or an initial £30 from take-home pay, into their workplace pension, they too could be on target for a £100,000 pension pot.
Cameron explained that a pension gives a better return than an ISA over the same period.
“Getting into the savings habit early can make a huge difference to how much you can build up. The other important aspect is where you are investing your money. An initial £60 per month saved in a savings account or cash ISA returning 1% per annum would grow to only £52,000 over 40 years,” he said.
“On the other hand, those prepared to take more investment risk could see higher returns. Over 40 years, an initial £60 contribution per month, but with an investment return of 6% each year rather than 5% would produce a pot of £126,100, around £26k higher. If considering investment choices, we recommend seeking advice.”