£1000 Saved in Three Different Ways – The Results after Three Years #ad

I started a financial experiment three years ago comparing the returns on different ways of saving £1000. I wanted to see in real £££ and % growth (or loss), how the savings were changing over time and which savings pots grew the fastest. This was me putting my money where my mouth is to show how balances can rise or fall over time.

This is an experiment that will carry on indefinitely, it will be so interesting to reflect back after ten years to see the growth of the £1000. Each savings pot has a different time frame and risk level attached and accessibility. I have money in cash, where returns have changed hugely over 2023 with interest rates increasing. I also have money invested into a Vanguard Stocks and Shares ISA and money invested into a PensionBee Fossil Fuel Free pension plan. This post in in collaboration with PensionBee.

The intention of this experiment is to show that over longer periods of time the growth on investments and pensions is significantly higher than cash. We are still in a situation where a lot more men invest than women and I want to change this, dispel any myths and share results with my own money.

On July 7th 2020 I saved £4000, £1000 in four different ways. I originally had £1000 saved into a Marcus Instant Access Savings Account and another £1000 saved into a fixed term cash savings account from Zopa. In July of 2022 my fixed term savings account matured, and I withdrew the money, removing fixed term savings from the experiment.

I also moved my instant access cash from Marcus over to Zopa smart savings where the interest rates were higher.

These are the three places for my savings on July 7th 2023.

  1. Zopa bank instant Access Smart Savings
  2. Life Strategy 80% equity fund, Stock and Shares ISA with Vanguard
  3. PensionBee pension, Tracker fund until Dec 2020, then Fossil Fuel Free fund Jan 2021 onwards.

How have these three different methods of savings performed over time and where is the best place for my money?

Immediate Access Cash Savings

My first £1000 is held in a Zopa Bank Smart Saver account. This account has one of the better interest rates on the market, currently paying 4.03% at 7th July 2023. This is a great easy access place to keep emergency cash savings. The money is available instantly if needed and held in a separate bank to my personal banking, hence creating a barrier of accessibility and making me less likely to dip into.

This is also the place where I keep all of my spare cash including my emergency fund of three (to six) months of covering my essential expenses. It’s also where I store my company tax bill money.

Back in 2020 when I first started saving this money was in a Marcus Bank account paying interest at a ‘market leading’ rate of 1.05%, now up at 4.03% so cash returns are much better in year 3 than years 1 + 2.

CashJul-20Jul-21Jul-22Jul-23Total Growth
Value £1,0001,0061,0151,04040
Annual Growth £6925 
Annual Growth % 0.6%0.9%2.5%4.0%

My £1000 cash balance over three years has earned £40 interest.

An average rate of 4% over three years or 1.3% per year.

Saving in cash changes over time as interest rates change as much as they have done this year. A return of around £10 per year on £1000 balance in 2020 changes to £40 a year in 2023. But how does this compare to investing or a pension? Will the returns be much higher?

No matter the return, cash is the best place to keep your emergency cash and short-term savings. In actual terms the money grows over time with the small amount of interest, it will never result in an actual cash loss. The money is held risk-free.

However, we must be aware of inflationary impact. Inflation at July 2023 has fallen slightly compared to July at 7.9% (July 2022 was 9.1%), meaning that on average everything we buy is 7.9% more expensive compared to a year ago.

Stocks & Shares ISA

My second choice of saving £1000 or investing, is in a Stocks & Shares (S&S) ISA with Vanguard (other investment providers are available, this is the one I choose to invest with due to lower fees). A S&S ISA is an investment product, not cash, meaning that it comes with risk that my money can rise or fall in value. S&S ISAs are more suitable for medium term investing where the money is held for at least five years or longer.

Within my S&S ISA I invest in a balanced fund of 80% company shares and 20% bonds. The value of my investment increases if my funds go up in value or I make a loss if my investment fund reduces in value.

The money is accessible within a few days if you need it and to access your cash you will need to sell your investment. It is not suitable for emergency savings, as you might need that money when markets are down, and you may have lost money on your original investment.

I put my £1000 savings in July 2020 into an 80% Equity LifeStrategy Fund.

S&S ISAJul-20Jul-21Jul-22Jul-23Total Growth
Value £1,0001,1931,1431,173173
Annual Growth £193-5030
Annual Growth %19.3%-4.2%2.6%17.3%

My £1000 Vanguard S&S ISA has grown by £173 in three years.

The valuation at July 2023 being £1,173, a total growth of 17.3% or 5.8% per year.

It’s really interesting to look at the performance of this investment over the three-year period. At the end of year 1 I was in awe of the 19% growth, I knew this was too good to be true as I had bought the fund at the low point not long after the covid market crash, there was a huge surge in the market between July 2020 and July 2021. If only I had put all my money into the fund in July 2020 and sold at July 2021! The power of hindsight.

In year two from July 2021 to July 2022 there was an element of market correction where my fund value dropped back down to £1143, hence showing that, yes, investing can mean you lose money.

There was a smaller amount of growth in the third year with a 2.6% growth. The total growth over the three years was 17.3%, averaging out to 5.8% per year. The average prudent assumption that I always include in investment growth is 5% per year so this equates similarly to that growth rule.

Despite the fluctuations from year to year an average growth of 5.8% is still much better than the cash growth of 1.3% per year. I am happy with this level of growth and continue to transfer £200 a month into my stocks and shares ISA as part of my balanced savings strategy.

PensionBee Pension

My third choice of savings was to put £1000 into my pension with PensionBee. My private pension is an important long-term savings strategy, state pension is certainly not enough to live on, see my experiment where I lived off state pension for a week. I will need income from my private pension savings when I no longer earn a paid salary (if that ever happens!)

I am unable to access this money until the age of 57 (this age increases from 55 to 57 from 2028, but the age might change again depending on government rule changes).

Pension savings, similar to the S&S ISA are invested into a fund of my choice within the PensionBee fund options. Initially my pension was invested into the ‘Tracker’ fund, but I moved this over to the Fossil Fuel Free fund when it was launched in January 2021. I want to make a real difference to the environment and know that moving my money into ethical investing is the most powerful way of doing this.

PensionJul-20Jul-21Jul-22Jul-23Total Growth
Value £1,0001,2311,2371,340340
Annual Growth £2316103 
Annual Growth % 23.1%0.5%8.3%34.0%

My £1000 saved into my PensionBee Pension has grown by £340 in three years.

The valuation at July 2023 being £1,340, a three-year growth of 34% or 11% per year.

Again, similar movements compared to the S&S ISA, as one would expect with both invested in the stock market. Although my pension has performed better.

There was a significant growth during year 1 of 23%, not much movement in year 2, 0.5% then another good amount of growth in year 3, 8.3%. This indicates that ethical, fossil fuel free investing has performed better than my LifeStrategy 80/20 fund which includes all industries.

The total growth over three years is 34% or 11% per year, nearly double the growth of my S&S ISA and is many times higher than my cash savings. Of course, this money is locked away for at least 11 years when I turn 57.

How we save our money is a very personal decision and changes over time. Over the past three years I made the decision to prioritise my pensions savings putting as much as I could away for later life. Based on these returns I am glad I have made this decision!

A worthy point to add to the pensions value growth are the tax benefits of pension contributions. I make my pensions contributions via my limited company, an allowable expense saving me 19% corporation tax. As a self-employed or employed person you get tax relief at source, if you add £80 into your pension from a personal bank account, HMRC will usually add in another £20 in tax relief, all done via PensionBee.

Summary of Results

This is such an interesting experiment to keep track of over the years, and based on the performance of the past three years I can see that the returns are better when I invest into my S&S ISA and much better when I invest in my Pension. This has a double winning impact on me, not only am I getting a great return on my money in my pension, I am also doing good for the world by investing ethically in a way to help save the planet.

I will continue to track this performance and will also continue to prioritise my pensions savings (of at least £1000 per month) and my S&S ISA savings (of £200 per month). My emergency fund remains in cash, but that stays at just the three months of essential expenses, which suits my personal attitude to risk.

Please be aware that any form of investment can go up and down. You may want to consider advice from a qualified IFA. Just make sure they come recommended by a trusted friend and check their investment levels.

This post was written in collaboration with PensionBee. Capital at risk.


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Lynn Beattie

Aka Mrs MummyPenny

Personal Finance Expert

I write about personal finance made simple, lifestyle choices that will save you time and money, as well as products and services that offer great value.

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2 Responses

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