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How I’d plan to double my State Pension with just £2.50 per day

Putting money away for retirement can seem like a chore. Why should you have to lock your money away for the future when you can spend it today?

However, saving for the future is actually easier than many people expect. With that in mind, today I’m going to explain how you can double your State Pension by saving just £2.50 a day, the price of takeaway coffee or supermarket meal deal.

Get started when you can

The biggest mistake most pension savers make is not saving for the future as soon as possible.

It does not matter how much you can afford, as long as you’re putting some money away every month, you’ll be surprised how quickly these modest contributions can add up.

For example, £2.50 a day might not seem like a tremendous amount of money, but if you keep this up for four decades, you will have a pension pot of £36,500 excluding any tax relief or interest.

I calculate a saver will need as much as £218,000 put away at the time of retirement to be able to double their State Pension. Saving alone won’t get you to this target. In my opinion, the best way to meet this goal is to invest your money.

Start investing

Investors are spoilt for choice today when it comes to choosing a low-cost investment platform to help you save for the future. Most platforms offer a monthly investment plan and allow you to invest as little as £25 a month.

I believe the best way to invest this cash is to buy a low-cost index tracker fund. There are various fund options you can select, but my preference is a low-cost FTSE All-Share tracker fund. It tracks the performance of the 600 largest companies in the UK and has produced an average annual total return of 8% over the past decade.

At this rate of return, my figures show me that a daily investment of just £2.50 would grow to be worth £13,900 after a decade of saving. After 40 years of saving only £2.50 a day, the pot could be worth £257,000 according to my numbers.

These numbers exclude any tax relief received. SIPP contributions are entitled to tax relief of at least 20% for basic rate taxpayers, which would boost the daily contributions of £2.50 per day to £3.13.

After 40 years of saving at this rate, the pot could be worth as much as £322,000 according to my numbers.

The bottom line

These are only rough, back-of-the-envelope calculations but I believe they clearly show just how easy it is to double your State Pension by saving just a few pounds a day and investing for the long term.

By making the most of the tax benefits and investing tools available, you can get your money working for you while you concentrate on the essential things in life.

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Rupert Hargreaves owns no share 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.