The average UK worker will have earned a total of £1 million by the time they are just over 56 and a half years old, according to new research from Prudential.
The analysis of average earnings for each age group, as measured by the ONS, demonstrates that working your way to £1 million in total earnings is entirely possible for someone who started work at the age of 18 and continues to receive an average income throughout their working life.
Prudential has calculated that a man earning the average wage for his age throughout his career will have earned his first million before he is 51 years old. Meanwhile, a woman earning the average for her age for all of her career will have to wait nearly 20 years longer, well beyond the State Pension age, to nearly six months after her seventieth birthday before reaching the million-pound milestone. However, the amount of time women need to wait has fallen by nearly two years since the analysis was last carried out in 2012.
Since 2012, the average incomes for women overall have increased slightly and the average income for men in their 30s and 40s has seen a slight decrease. The average person today will earn their first million two months earlier than they would have done in 2012, (56 years, seven months and three weeks in 2014 compared with 56 years, nine months and three weeks in 2012).
By the time the average worker has earned their first million they will have paid approximately £123,300 in tax and £93,200 in National Insurance – a total of around £216,500. The impact of tax on a lifetime’s earnings can however be reduced by contributing to a pension and benefitting from resulting tax relief. An individual paying £100 per month personally into a pension over a 40 year career could receive additional tax relief of £12,000.
Stan Russell, retirement specialist at Prudential, said: “Being a millionaire is a dream for most of us, but the reality is that the average UK employee will easily earn £1 million in a lifetime of work. For many people, this cumulative view of lifetime earnings will help open their eyes to the amounts they could be saving for retirement.
“Of course life tends to get in the way and it is not as simple as recommending that workers should set aside a fixed amount of their lifetime income. But it is definitely the case that the earlier you save and the more you save, the better the retirement income you can expect and the more tax relief you will receive.
“Pensions are an extremely tax efficient way of saving and the planned reforms announced in the Budget should make retirement saving more attractive. The reforms increase the choices available to savers and retirees, making it even more important to discuss your options with a retirement specialist before making retirement income decisions.”
Prudential’s analysis also found that if the average person works until the age of 65, their career earnings before tax will be £1,208,500. If they keep going to 70, then earnings will hit £1,318,000 and if they battle on to 75 they will earn £1,427,500.
