Image source: Getty Images <\/p>\n
Building a Self-Invested Personal Pension (SIPP) or ISA worth a mighty million pounds may sound like a fantastical dream, but it\u2019s far from impossible.<\/p>\n
I\u2019m not selling snake oil here. To build a seven-figure retirement pot takes time, patience and bags of discipline, but can be done if investors start early and stick with it.<\/p>\n
The longer an investor has, the better their chances. Relatively modest sums can compound and grow over time, free of tax inside their SIPP. So there\u2019s no time to lose.<\/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
I\u2019ve done some really basic number-crunching to show how wealth can build over a 30-year period. Let\u2019s say our investor starts from scratch at 35. We\u2019ll also assume they generate the average long-term total return on the FTSE 100, which is around 8% a year, with all dividends reinvested.<\/p>\n
If they invested \u00a3700 a month, their SIPP should be worth \u00a31,027,706 by age 65. Obviously, this isn\u2019t guaranteed. It could be more, could be less. And I accept the \u00a3700 is a lot to find aged 35.<\/p>\n
However, SIPP contributions attract tax relief at 20%, 40% of 45%, which speeds up the process. A 40% taxpayer only has to pay in \u00a3420 a month. Tax relief will top that up to \u00a3700.<\/p>\n
But what if the investor isn\u2019t starting from scratch? Let\u2019s say they have \u00a3100,000 in their SIPP on day one, after transferring over some legacy personal and company pensions (something I\u2019ve done).<\/p>\n
To turn that \u00a3100k into \u00a31m by age 65, here\u2019s how much they would have to invest every month. Nothing! I was surprised too. Growth of 8% a year would do the job in 30 years, but we have to remember that 8% isn\u2019t guaranteed. No contributions required \u2013 although I would suggest making them anyway. The more the merrier.<\/p>\n
Let\u2019s say they have \u00a350,000. To hit a million over 30 years, they\u2019d need to invest \u00a3350 a month on top. After tax relief, that\u2019s just \u00a3210 for a 40% taxpayer.<\/p>\n
With no time to lose, investors may want to buy some FTSE 100 stocks pretty quickly. Insurer Aviva (LSE: AV) could be a good portfolio building block to research further.<\/p>\n
The shares have had a stellar run, up 36% in a year, and 132% over five years. Today, they have a trailing dividend income of 5.5%. Reinvested, they will have turbo-charged those growth figures.<\/p>\n
Story Continues <\/p>\n
CEO Amanda Blanc\u2019s shaken up Aviva since her appointment in 2020. Before she sharpened its focus, the shares had idled for years. It\u2019s now one of the most impressive dividend growth shares on the FTSE 100 and has a new growth opportunity, following its \u00a33.7bn takeover of motor insurer Direct Line.<\/p>\n
No share climbs in a straight line forever. After a strong run, the shares look expensive, with a price-to-earnings ratio of 27.5. That\u2019s almost double the FTSE 100 long-term average of around 15. A bout of stock market volatility could knock the value of assets under management, and squeeze profits.<\/p>\n
I\u2019d suggest building a balanced portfolio of around 15 different FTSE shares across dividend sectors, to mitigate risks like these. With a long-term view, a million-pound SIPP or ISA is possible, but never guaranteed.<\/p>\n
The post Starting with \u00a3100k, how long would it take to build a million-pound SIPP?<\/a> appeared first on The Motley Fool UK<\/a>.<\/p>\n More reading<\/p>\n Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.<\/a><\/p>\n Motley Fool UK 2025<\/p>\n","protected":false},"excerpt":{"rendered":"Image source: Getty Images Building a Self-Invested Personal Pension (SIPP) or ISA worth a mighty million pounds may…\n","protected":false},"author":2,"featured_media":67044,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[84,4176,2016,4174,4175,33136,56,54,55],"class_list":["post-67043","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-finance","tag-ftse-100","tag-personal-finance","tag-personalfinance","tag-self-invested-personal-pension","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/67043","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=67043"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/67043\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/67044"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=67043"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=67043"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=67043"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}