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Image source: Getty Images<\/p>\n
Due to its generous tax relief and flexibility around the types of investments that can be held, a Self-Invested Personal Pension (SIPP) is a great way of saving for old age. However, it\u2019s clear that not enough of us are saving sufficiently to provide for a comfortable retirement.<\/p>\n
Indeed, according to the Wealth & Assets Survey by the Office for National Statistics, the average pension pot for a 47 year-old is \u00a327,000, excluding those with defined benefit schemes. Fortunately, it\u2019s not too late to make amends. <\/p>\n
According to Legal & General, there\u2019s still a \u201cwindow of opportunity\u201d for those in their 40s and 50s to change their retirement prospects. And this includes those that haven\u2019t started saving yet. Let\u2019s take a closer look and see what\u2019s possible.<\/p>\n
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.<\/p>\n
Don\u2019t give up<\/p>\n
Although Legal & General\u2019s research into retirement planning reveals that 9m people aged 25 to 54 are \u201cnot currently on track for an adequate retirement\u201d, there\u2019s no need to panic.<\/p>\n
The group claims that a 47-year-old, starting with nothing, could build a savings pot of \u00a3116,000 over two decades. This assumes a contribution of 8% of the UK\u2019s average salary and a real (post-inflation<\/a>) annual investment growth rate of 4.1%. As an added bonus, after 20 years, this person would be entitled to receive the State Pension.<\/p>\n In cash terms, what does this mean? <\/p>\n Of course, it\u2019s impossible to see into the future but, at the moment, someone with a full record of National Insurance contributions is entitled to a State Pension of \u00a311,973 a year. And a person holding a \u00a3116,000 SIPP of dividend shares yielding 6% could earn a further \u00a36,960. Overall, this would give an annual income of \u00a318,933. Not bad for someone who only started saving seriously in their late 40s.<\/p>\n Conservative assumptions<\/p>\n If more people take control of their retirement planning, then FTSE 250 wealth manager AJ Bell (LSE:AJB<\/a>) could be one of the beneficiaries. Although the group sold its pensions business a year ago, it still offers its clients access to SIPPs.<\/p>\n