One million pounds sounds like a life-changing sum, but in reality it might be what you need to save for the retirement you want.

Getting there is tough, though. It is not easy to tell how big your pension pot will be by the time you retire – and saving just a little bit more today, or boosting your investment returns, could make a big difference in a few decades' time.

Check your pension forecast using the calculator below to see how far off you are from becoming a pension millionaire, and find out what you need to do to make the milestone.

It can seem daunting, but a million pounds might be what you need for the retirement you want.

In fact, a pension pot of £1m could generate an income of around £50,000 a year if used to buy an annuity. 

The Retirement Living Standards considers the amounts needed for three tiers of lifestyle – minimum, moderate and comfortable.

A single person will need £10,900 a year to achieve the minimum living standard, £20,800 a year for the moderate standard, and £33,600 a year for a comfortable standard of living. For couples it is a total of £16,700, £30,600 and £49,700, respectively.

“Becoming a pension millionaire may seem like a distant pipe dream,” says Alice Guy, head of pensions and savings at Interactive Investor. “But it’s surprisingly achievable with a long period of regular investing.”

There really is no one-size-fits-all plan when it comes to investing for retirement, but a crucial factor is starting early.

Tom Selby, head of retirement policy at AJ Bell, said: “Anyone aiming to be a pensions millionaire will likely need to contribute significant amounts from an early age, scale up those contributions as they get older and make sure their fund is invested in a way which means they can benefit from compound investment growth over decades.”

Here’s what you need to know if you want to hit that impressive £1m total.

The beauty of pensions is the tax relief on contributions. You get 20 per cent paid into your pension by HM Revenue & Customs and higher or additional rate taxpayers claim relief on your self-assessment tax return at either 40 per cent or 45 per cent.

Someone earning a moderately high income could achieve £1m if they save £700 a month into their pension for 40 years, assuming 5 per cent investment growth, according to Guy at Interactive Investor.

Those contributions would only cost £460 per month before tax, assuming they earned £50,000 and their employer contributed 3 per cent into their pension pot.

Many people use their workplace pension as their only method of saving for retirement. It’s a smart way to save as you will get a contribution from your employer on top of your own contributions.

The minimum total contribution under automatic enrolment is 8 per cent of qualifying earnings, but lots of employers offer more generous terms than this.

However, it’s important to make sure that money is invested well to boost returns.

Malcolm Steel, of independent advice firm Mearns & Company, says: “It would be wise to review the investment strategy of any workplace scheme and consider whether this is appropriate for your goals, attitude to investment risk and any ethical investment considerations.

“All employers have a responsibility to select a default investment approach, but this will not necessarily be the best option for all.”

Indeed, they often have large chunks invested in cautious assets, such as bonds, and over 30 years this can make a significant difference to the value of your pension if you miss out on periods where the stock market is rising.

Another way to turbocharge your retirement savings is to run a personal pension alongside workplace schemes.

If you’re self-employed, you’ll need to use a personal pension to save for retirement.

A self-invested personal pension (Sipp) allows you total control over your money and how it’s invested. You can decide the amount you contribute and the funds, trusts or stocks your pension invests in.

Steel says: “When deciding how to invest your Sipp contributions, a core holding in a global multi-asset fund would be a great place to start. These types of funds are not fixed to any one asset class or region, and this gives them flexibility to serve well as an all-weather holding.”

Steel tips the Troy Trojan fund, which has returned 32 per cent over five years.

He added: “Beyond a strong core holding, part of the portfolio could be allocated to higher risk funds which have the potential to deliver outstanding returns over the longer-term.

“Although out of favour today, the Scottish Mortgage Investment Trust could be worthy of a modest allocation. The trust has an exceptional long-term track record, although it has been under pressure throughout the past 18 months.

“Although not for the faint hearted, it is currently trading on a 20 per cent discount to net asset value, which just might be the biggest discount since the trust was founded in 1909.”

Scottish Mortgage has returned 40 per cent in five years. You can either start your Sipp from scratch with money that has not been held in a pension, or you can use it as a new home for other pension schemes you hold elsewhere. Sipps allow you to transfer in from other schemes – private and workplace – so you can have all your retirement savings in one place.

Having your retirement savings under one roof can make things much easier as you won’t have to deal with multiple providers in your quest to reach £1m. 

You only have one company to contact and one place to check your fund is on track to meeting your long- term financial goals.

Combining your pensions to a Sipp would enable you to manage everything online – perhaps even through a mobile app.

You also gain control of how your money is invested from a wider and more flexible range of investment options than might be available through some outdated workplace pension schemes.

Consolidating your pensions can lower charges, as with multiple pension plans you’ll be paying fees on each one, which is not very cost-effective. However, it’s important to check you’re not giving up any valuable guarantees attached to pension schemes by moving the money.

It’s also important to consider any difference in annual charges before taking any action.

At investment platform Interactive Investor, 2.4 per cent of Sipp customers are millionaires. They have an average age of 62, as opposed to 53 for all Sipp investors.

The most popular 10 holdings for these millionaires are the funds Scottish Mortgage Investment Trust and Fundsmith Equity, followed by individual stocks – Shell, Alliance Trust, Lloyds Banking Group, GSK, BP, Legal & General, Aviva and Haleon.

Should you reach £1 million, there’s no need to stop there now that an important change has been made to pensions.

Previously, HMRC has limited the amount you can hold in your pension pots combined.

The limit, known as the Lifetime Allowance (LTA), was most recently set at £1,073,100. Any excess was taxed at a maximum of 55 per cent – but this will no longer be the case.

On April 6, the LTA charge that applied to funds over £1,073,100 was removed, with the lifetime allowance set to be removed from legislation completely from April 2024.

The scrapping of the lifetime allowance means that you can save into your pensions without the concern of nasty tax charge should you breach a limit.  

Guy adds: “In time, we should see more pension millionaires with workers now free to make full use of the amazing tax benefit of pension saving. The lifetime allowance rules previously scared off savers who were understandably keen to avoid punishing tax charges.”

Ploughing every available penny into a pension is not always the right move for those who might have other, more pressing, commitments such as getting on the property ladder, paying down a mortgage or perhaps school fees.

It also becomes a challenge for parents who take a career break to raise a family.

Those with no income at all are limited to saving a maximum of £2,880 a year into a pension – topped up to £3,600 by the Government to match basic rate tax relief of 20 per cent.

You might also stop pension contributions to reach a near-term financial goal, but don’t forget to restart them.

Keeping pension savings going, even at a modest level, can make a significant difference to eventual retirement income.

Many company schemes automatically move your funds into lower risk investments as you near retirement, through a process known as ‘lifestyling’.

This is likely to limit the growth in your pension severely in later years, so you might want to opt out of that process.

Staying invested in equities gives your money a better chance of keeping up with inflation – and reaching £1m if you’re not there yet.

However, as you get closer to the time you start drawing on your money, you may want to tweak the risk profile of your investments to take the risk level down a notch.

You can use other assets to diversify beyond shares and bonds. These include income generating infrastructure and property investments, as well as physical gold.

Jason Hollands, of Evelyn, says: “The role of other asset classes as diversifiers will become more important in the later years when you are looking to mitigate the potential for periodic violent swings in equity markets, but equities should still represent the majority of your pension portfolio.”

When it comes to deciding on how to access your money for a regular income, you can choose drawdown where you take an income and the rest remains invested.

It’s essential that your returns keep pace with inflation and you don’t start running down capital early on, which means you should still have a decent exposure to equities, according to the experts.

Rob Burgeman, at wealth manager Brewin Dolphin, says: “It’s important to ensure you keep close track of your money. In simple terms, if you want to draw 3 per cent of your savings in retirement, you need an investment strategy that has a fighting chance of generating you a return of 6 per cent. 

"That matters less as you get into your eighties and nineties, but in one’s sixties, longer term returns are essential. Equities should do the heavy lifting of capital appreciation.”

In drawdown, you can withdraw 4-5 per cent of your pot for your savings to last an estimated 30 years, according to Fidelity. Based on that, a £1m pot would generate between £40,000 and £50,000 income per year.

Alternatively, you can use pension savings to buy an annuity which will pay a set amount for the rest of your life.

Rates on annuities have been improving – they’re currently close to a 14-year high – and a healthy 65-year-old with £1m of pension savings could currently turn that into a fixed annual income of around £68,700 – or an inflation-linked one starting at £43,000 a year.

A combination of drawdown and an annuity might be in the answer, using an annuity to cover essential bills, with the rest in drawdown where you can vary the amount you take, according to what you need.

It’s important to shop around for the best annuity rate available to you. Once you buy an annuity, there’s no reversing or switching it, so you need to get it right first time.

Selby warns that even if you build up a £1m pension, it might not last as long as you think if you retire too early.

“For someone who retires in their mid-50s, the money might need to stretch over 40 years or more. With £1m, you still might not have enough to sustain a luxurious lifestyle, so accessing your pension later will mean it has more time to benefit from investment growth, meaning when you do come to retire you could potentially take a larger income from a larger pot of money.”