Why £1m is not enough

£1 million is no longer considered enough to retire on

By BBC News Online's Jenny Matthews

Who wants to be a millionaire? Not us!

Despite the popularity of the TV quiz show, a new survey by the Royal Mail suggests thousands of Britons would not be thrilled to win £1 million.

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The survey says one in 10 Britons in their 20s or 30s believe the sum is not enough to be considered a win of a lifetime.

And they wouldn't even bother entering a competition in which the prize was as small as, say, a car.

Indeed, being a millionaire is not unusual nowadays.

Statistics from credit agency Experian suggest there are about 50,000 millionaires in Britain - and few would say they had enough money to do whatever they wanted.

Is £1m really not enough?

Most financial advisors agree that although £1m is a nice sum to win, it is not enough to fund a dream lifestyle.

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To work out how much that would cost, independent financial advisers Holden Meehan reckon you should take your desired annual income, and multiply it by 25.

This assumes a 4% yield from mixed investments, and is a yardstick used by many financial advisers.

But using this calculation, £1m would yield only £40,000 a year - hardly the stuff dreams are made of when the average wage is currently standing at just under £22,000.

And there's worse news. According to some experts, £1m is not only inadequate for a change of lifestyle - it is a positively dangerous sum.

UK properties for £1m

Three-bedroom Notting Hill flat with communal garden: £1.1m (For sale: Winkworth)

Six-bedroom Augustus House near Edinburgh: £1m (Sold: Cala)

Eight-bedroom family home in Chobham, Surrey: £1.15m (For sale: Knight Frank)

Philip Platts of accountant Arthur Andersen has advised many lottery winners, and says a windfall of between £1million and £1.5million can be a "danger area".

"It may seem like a lot of money but a million in a deposit account is going to bring you an income of only £50,000 before tax," he says.

"Which is not going to enable you to retire in luxury, especially if you go out and spend some to celebrate."

In fact, most financial advisers would suggest giving up work only when you've scooped two or three million, thus earning at least £80,000 before tax every year.

So how much is enough?

According to most financial advisers, the magic sum for a two-adult, two-child family is £5m.

This would produce a pre-tax income of about £200,000 if none of it was spent beforehand, and about £167,000 a year allowing an initial outlay of £750,000 for a dream home, £50,000 on gifts to family members, and £20,000 on an immediate luxury holiday.

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But if you wanted to become filthy, stinking rich you'd need a lot more than this.

A couple with two children would find it quite easy to spend about £7 million immediately on houses, cars and furnishings alone.

A typical four bedroom house in Belgravia, for example, costs about £3.5m, a Tuscan villa about £1m and a Sussex country pile about £2m.

They may want at least two top-range cars - say, a 4x4 vehicle for about £50,000, and a Beckham-style Ferrari for about £220,000. And furnishings would cost at least £250,000.

Experts say the running costs to fund such a luxury lifestyle would hit about £450,000 a year.

This includes items such as private school fees, basic staff, holidays and entertainments such as football season tickets.

At Holden Meehan's estimates, that would mean you'd need a capital sum of £11,250,000, plus the initial outlay on three dream homes and two dream cars.

And how much does that come to, not accounting for the potentially devastating effects of tax and inflation?

The princely sum of £18,250,000.