Not having to worry about money when you reach retirement may seem like a pipe dream for many, but you don’t have to be rich to retire as a pension millionaire.

In October Generation Z were warned they would need at least £3 million in their pension to maintain a “comfortable” standard of retirement — equivalent to a 25-year-old saving at least £1,000 a month. The stark figures came from the wealth manager Rathbones, which looked at financial projections from the industry body Pensions UK and applied the effects of inflation over the next 60 years.

Yet the path to being a millionaire in retirement may not be as overwhelming as you think. Here’s how you can end working life with a multimillion pound pension.

How to reach your goal whatever your age

The figures may seem daunting. A 25-year-old basic-rate taxpayer who was not paying into a workplace pension scheme would need to put £552 a month — £6,624 a year — into a low-cost self-invested personal pension (Sipp) to build up a million-pound pot, according to the investment firm Vanguard. This is based on existing tax rules and assumes an average annual investment return of 5 per cent.

For many of Gen Z such a large contribution is unrealistic given the rising cost of living and housing. However, Vanguard found another way to hit the million mark that may not feel like such a burden.

It said a 25-year-old who saved £87 a month — £1,044 a year — into a Sipp and gradually increased the amount by 10 per cent a year would enjoy a million-pound pot after 40 years. It’s not the £3 million Rathbones said may be needed, but it is a start.

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For those older than 25 the path to being a millionaire looks different. A 37-year-old about 30 years away from retirement earning £40,000 with pension savings of £50,000 would need to be putting an extra £566 away each month, alongside the standard 8 per cent workplace pension contribution.

“A million seems like a daunting number, but with the right strategies in place it may be more achievable than you think,” Andrew Marker from Vanguard said. “If you combine regular, disciplined investing with time in the market and the tax relief from investing in a pension you could build up a sizeable pension pot by the time you retire.”

Figures from AJ Bell show the rapid effect a change in contributions can have. The investment platform looked at the difference between contributing £1,040, £5,200 and £7,800 over the course of 40 years. Assuming 4 per cent growth and an annual 2.5 per cent increase in contributions (in line with pay rises), contributing £7,800 a year could mean that savers have more than £1 million by the time they retire.

A chunk of these contributions can be made via your workplace pension, where your employer will match what you put in and you earn tax relief on top.

“Although it may have been tempting to opt out of your workplace pension over the past few years to fund rising bills and everyday spending, that should be a last resort and something you try and reverse as soon as possible,” Tom Selby from AJ Bell said. “Opting out means you won’t get your employer contribution, effectively meaning you’re giving up on free money and voluntarily reducing your overall pay package.”

The steps to becoming a millionaire

Starting early is the most powerful tool someone has on the path to becoming a pension millionaire, says Katharine Photiou from the pension firm L&G. “Even small contributions in your twenties or thirties can make a huge difference by the time you reach retirement,” she said.

L&G calculated that someone putting an extra £30 a month into their pension from the age of 27 could have an extra £100,000 by the time they retire.

If you’re halfway through your working life and worry you may not have enough, there are ways you can turbocharge your pension. You could consider directing future pay rises or bonuses straight into your pension, boosting your pot without feeling a hit on your take-home pay. Or you could increase your monthly contributions.

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Under auto-enrolment the minimum contribution is 8 per cent — 3 per cent from your employer and 5 per cent from you. Check whether your workplace will match your contributions if you increase them.

Photiou advises consolidating your pension pots. “The traditional ‘job for life’ no longer applies, so you might have several pension pots scattered around,” she said. “Bringing them together can make your pension easier to manage, reduce fees and ensure more of your money stays invested to maximise your growth.”

Figures from the pension company Standard Life found that millions of pots risk being forgotten or lost, with about 25 per cent of UK adults not knowing what firm their pension is with. Some 66 per cent have never tried to track down lost pots, despite the average missing pension being worth almost £10,000. The government’s pension tracing service may be able to help.

Do you need more than a million?

With inheritance tax due to be levied on pensions from April 2027, the previous lifetime allowance of £1.073 million is a “useful benchmark” to aim for, Nick Nesbitt from the consultancy Forvis Mazars said, because this secures the maximum 25 per cent tax-free lump sum of £268,275. Money you withdraw from your pot above this amount is taxed as income at your marginal rate. “Exceeding this figure could force people into paying higher-rate income tax on pension withdrawals to prevent their estate from facing double — or triple — taxation on death,” Nesbitt said.

Someone who retires with a pension of £1.073 million can strategically draw down on their pot to make sure it lasts a long retirement. Someone retiring at 60 who draws down the maximum income each year up to the basic-rate tax limit (£50,270) whose portfolio grows at a rate of 4 per cent a year could sustain this income until the age of 90 and have about £200,000 to pass on, according to Forvis Mazars.