As we near the end of 2020 my mind turns to my savings goals that I set at the beginning of this year. This was the decade that I was going to take saving SERIOUSLY and put some meaningful amounts away into my pension and investments and achieve my savings goals. I wrote this rather wonderful post about my ten-year personal finance goals.
In summary my plan every year was to pay £6,000 into my pension, plus £2,400 into my stocks and shares ISA plus an additional £4,000 into mortgage overpayments. I also planned to build up my short-term emergency fund and holiday fund to £10k. But how little did I know about the events of 2020 and how they might impact on my financial goals.
My 2020 Pension Goals
My pension pot is currently not where I need it to be. At the beginning of 2020 it sat at £53k. If I did nothing to add to it this would be worth approximately £80k by the age of 65 using the retirement planner on the PensionBee app. £80k is not going to last very long into retirement. If I withdrew £1000 a month from my pension it would be gone by the age of 72.
The impact of paying in £6k per year into my pension pot every year until the age of 65 is huge. My projection of £80k increases to £270k. See the yellow line in the graph below taken from the retirement planner in the PensionBee app.
If I withdraw £1000 per month from my pension this time the pension pot lasts until the age of 95. This does not include any state pension benefits, who knows what will happen to that in years to come. This feels a lot better. I know that putting £500 a month into the pension is the right amount to protect my future and ensure that I will still be able to live a fruitful life after my earning days are over (but will they ever end?!).
The great news is that I have put £6k into my pension this year! In fact, a little bit more. I put £1,000 into my pension in July and then another £5,000 in December. I prefer the flexibility of putting money into my pension as and when I choose to, rather than a set amount each month. There has also been an additional £300 so far added to my pension pot via refer a friend bonuses. Every person who transfers their pension to PensionBee using my referral gets £50 added to their pension, plus I get £50 as well.
It has of course been a volatile year for investments and pensions. At one point my £53k from the beginning of 2020 had dropped to £40k. But it has since recovered as you can see from this graph of one-year performance. Pensions are a very long-term investment and you can expect rises and drops as the market changes over time. Note this analysis It doesn’t yet include the £5k Dec addition yet, which is still pending. I will end 2020 with a pension pot of around £58k.
I am keen to get to reach 6 figures and £100k in my pension pot as soon as possible and intend to add extra money in when I have it and don’t need it with certainty. I have been cautious in 2020 and have built up my emergency funds to a higher level. Once things have calmed, I will feel more comfortable about putting more of my cash into my pension. My current pension in sat in the tracker fund, with fees of 0.5%. These fees drop to 0.25% for any balance in excess of £100k. Another motivation to reach the magic £100k mark.
There is another huge benefit for my company tax bill where my £6,000 pension contributions are taken as a business expense. My profits reduce by £6,000 and corporation tax bill reduces also. And it’s a huge amount, I will pay £1,140 less tax. This is a big incentive to pay as much as I can into my pension that my company can afford.
I feel happy that my pension goals are on track. It gives me financial security and comfort to know that one day, in 20 years or so that I will have enough money to live my days without having to worry about earning money.
My 2020 Investment Goals
I had planned to put £200 a month into my Stocks & Shares ISA, this would have meant that I would have a balance of around £5k by the end of 2020 with my January balance plus additions. Alas this plan didn’t quite work out. I needed to raid most of my ISA in late January for an emergency tax payment and I stopped any monthly contributions when COVID-19 hit due to uncertainty about cash flow for the remainder of 2020.
I did transfer a one off chunk of £1000 into my investment in July, as part of a project to watch how £1000 changes over time with pension, investments, fixed terms saving and instant access savings, you can read that post here to see how the £1000 grew over time.
My ISA balance sits at £1500 currently with just £1400 added to my investment this year. But I did put an additional £1000 into my Zopa Fixed Term Savings. I have reached my savings goals just using different vehicles for the savings.
My Over Payment of Mortgage
A complete non achievement here, in fact I have gone the opposite way. In April I re-mortgaged taking on a large extra amount after my divorce and then I took a mortgage holiday for 6 months over the COVID-19 months.
The result here is that my mortgage balance has increased by around £2000 in interest incurred. Since October I have returned to paying my mortgage. I used this monthly saving to build up my afore mentioned emergency fund that now sits at more than my intended £10k.
Summary at The End of The Year
It’s time to reflect and feel really proud of my accomplishments during 2020. I have a solid emergency fund, have added some money to my S&S investments and added my intended savings into my pension. I feel so much more security than I did in January and I know that now and, in the future, it is possible to achieve all or most of my financial goals.
Did you achieve your financial goals this year? And what are your plans for 2021?
This is a collaborative post with PensionBee.