The Piano Diary

glass_half_full

Thanks @savingholmes. DS doesn't owe me anything as I have decided to give him the money rather than lend it. It would be too complicated to lend it and I don't think he would be able to repay anyway.

The pension fund has increased significantly since Trump was elected (+£15k). This is because the fund is heavily weighted to US tech equities ie the Nasdaq which has just shot up since his election. Not sure if this will be sustained but lets see. In theory, this means I could finish now and have a reasonable income in retirement. Now at £394K so basically very close to target now.

AgathaSquirrel

Exciting news about the pension.

glass_half_full

Dear diary and all,

Thanks @AgathaSquirrel!

As we approach the DC pension target, I am reviewing how we got here. It may fall back from the recent growth spurt over the last few days, but even so, it looks like we will reach £400k in the next few months. When I started this diary in 2018, the DC pension fund was £140k. We managed to get mortgage free in 2021. Following that, we increased the pension contributions significantly. I looked back and reviewed how much was saved into the pension each year and it was the following (approx). These numbers include employer contributions.

2018                    £2,239

2019                    £8,219

2020                    £10,400

2021                    £18,800

2022                    £35,712

2023                    £46,826

2024                    £14,894

Total                    £137,090

Totalling £140k + £137K = £277K

With fund worth £394k now then capital growth in this period is £117K

So it looks like significantly increasing pension savings post mortgage freedom has been the key step. A key year was 2023 where I saved nearly all of my salary. The other key is the growth which comes from time in the market. I could probably have done more and earlier. In 2018 I was 51 so it was quite late to focus on this I suppose. But on the other hand shows that you can still save a decent fund post 50.

So getting mortgage free means that you can redirect the mortgage payments and overpayments towards financial independence.

I recognise the privilege of having two incomes coming in. Health is also critical in all of this.

Long term planning is key, sticking to the goal as well.

AgathaSquirrel

Inspiring - well done!

savingholmes

Huge congratulations. The year when you sacrificed most of your salary was hard but paid off.

LadyWithAPlan

very impressive savings on the pension, helped by the tax advantages and of course time in the market.

glass_half_full

Dear diary and all,

Thank you @savingholmes, @AgathaSquirrel and @LadyWithAPlan.

Some additional thoughts and reflections.

Taking an interest in the pension itself. I decided some time ago to do two things, one to bring the pensions together in one place and secondly to have an interest in how the funds were invested. The second goal came from the fact that I noticed over several years that the growth was unimpressive and basically seemed to just cover the management fee plus a bit of inflation. Bringing them together wasn’t easy. At times it felt like the pension funds were conspiring to make it really difficult. Bringing three funds together involved two transfers and in each case it took around 6 months. I started to look at the performance of the funds and realised that some of the funds available were performing much better than others. I transferred across into these and although there have been ups and downs, overall the performance has been better.

@LadyWithAPlan you are so right about the tax savings. One of the reasons I decided to significantly increase contributions was that with the tax break, no other investment comes close in terms of the return that you can get over time. Ps I love your signature DON’T BUY STUFF. I have followed Frugalwoods in the past. So much wisdom in that simple instruction.

I’m going to talk to DS about setting up a pension. At his age it seems like a lifetime away and not something that needs thinking about. But small regular payments could grow into a significant amount over 30-40 years.

AgathaSquirrel

Excellent idea to talk to your son about pensions. My dad made an off hand remark to me about buying extra years on his pension and I did the same. I bought an extra 3 years of NHS pension and a small stakeholder pension and, I don’t yet know the impact, but I think it will make a difference to me on retirement.

LadyWithAPlan

I only wish I was as knowledgeable about pensions when I was earning a lot as a v young HR tax payer - would have really upped my DB and saved a lot of tax.. Still I enjoyed spending it - so yes do educate your son - I am haranguing my DN at present  - a simple Vang SIPP is an easy cheap set up and just works.. even the s+p 500 and the Van Global works. No need to get complicated.

Luckily when I did get  (!) to pay  HR tax again a few years ago I then invested every penny earnt over £50k -  has allowed me to go from 0 to a decent sum (£60k+) in Sipps in just 4 years. I am having to balance it with house deposit savings  so not adding the full whack but still good to find the tax advantage balance

glass_half_full

AgathaSquirrel said:

Excellent idea to talk to your son about pensions. My dad made an off hand remark to me about buying extra years on his pension and I did the same. I bought an extra 3 years of NHS pension and a small stakeholder pension and, I don’t yet know the impact, but I think it will make a difference to me on retirement.

Hi @AgathaSquirrel. Great that you took action after the advice from your dad.  Yes, for me it was a conversation with a very wise Scotsman at work in my twenties. He explained about share options and AVCs. Made a big impression on me and I paid into AVCs pretty much for the rest of my career.

LadyWithAPlan said:

I only wish I was as knowledgeable about pensions when I was earning a lot as a v young HR tax payer - would have really upped my DB and saved a lot of tax.. Still I enjoyed spending it - so yes do educate your son - I am haranguing my DN at present  - a simple Vang SIPP is an easy cheap set up and just works.. even the s+p 500 and the Van Global works. No need to get complicated.

Luckily when I did get  (!) to pay  HR tax again a few years ago I then invested every penny earnt over £50k -  has allowed me to go from 0 to a decent sum (£60k+) in Sipps in just 4 years. I am having to balance it with house deposit savings  so not adding the full whack but still good to find the tax advantage balance

Hi @LadyWithAPlan. Thanks, the Vanguard pension looks interesting, I like the simplicity of it. Glad you have been able to put aside a decent amount in the SIPP. As you say, there are many competing priorities.

The fund has reached £399K. I know its a bit silly to get too carried away as what goes up can certainly come down again. But I will raise a glass when it passes £400K.