Bigger fund for younger saver

The Daily Telegraph cited Albert Einstein’s saying that compound interest was the eighth wonder of the world in some examples of saving for retirement.

It started with a 21-year-old who saved £2,500 a year until the age of 30. With a 7% annual return his pension pot at age 70 would be worth £553,000. Then it considered another saver who started saving £2,500 a year at age 31 and continued until age 70. At the same 7% growth rate, his fund would be worth just £534,000, even though he had paid in four times as much. Finally, if grandparents were to contribute £2,500 a year for just two years for a new-born, the child would have a fund worth a remarkable £551,000 at age 70. Clearly Einstein was right. As for most areas of financial planning, doing it in plenty of time is the key to success.