The 2016/17 (Tax) Year Performance

The tax year ended this month, and I have now had a chance to update my performance. It has taken longer than normal as I threw every last penny of spare cash I had into my ISA before the year end, and I knew I would have to take some back out before the end of the month but I like to set myself the challenge.

Although I didn’t put anywhere near as much as I would have liked to in my ISA, overall it was still a very good year. So first of all, what did the various indices do, and how did they perform to give some idea of progress. This is the first year that I have also included VHYL and VWRL so I don’t have that much information in (I could easily go back but I am too lazy :)).

Remember, I calculate my returns based on the assumption that all contributions went in on day 1, so this really does hurt the performance of portfolio’s where the contribution is still significant compared to the size of the portfolio.

Note: I have updated the performance figures after discovering an error in my calculations which meant I was under reporting performance.

The Benchmarks

Index Performance
FTSE-100 20.4%
FTSE-250 14%
FTSE-All 19.3%
S&P500 17.5%
Dow Jones 15.3%
VWRL 30.4%
VHYL 28.2%

Well, that was certainly not what I was expecting. The VHYL and VWRL have really shot up, I am not sure if I got incorrect data historically for the end of last year, or if they really did shoot up that much. It will certainly be interesting to see how things pan out over the next few years.

So how did my various portfolios do over the last tax year?

Company Pension

I wasn’t expecting anything much from this over the year, as I only started paying into this at the start of the tax year, so my contributions each month are huge compared to the overall size of the portfolio. The funds are limited that I can select, but the website has a useful little view that shows what is contributions and what is growth.

Performance: 0.8%

Really? Well sadly yes based on the way I track my performance. Oh well – I expect this will continue to show bad returns (or good if there is a bear market!). Right now, this doesn’t bother me – the main thing is that I am throwing money into the market, regardless of what is going on. Every month before my pay even gets to my bank account, the pension has new funds added.

Personal Pension & ISA 1

So, how did my IFA do? I am sure this will be of interest to many people – was it worth it for him to take a cut of every single contribution I make? Well before I disclose the numbers, I did actually meet up with him back in March, and we reviewed the whole portfolios. That, and previous overall years performance, I think I will make another post on that to provide some of the insights.

Personal Pension: 18.6% 22.8%

ISA 1: 10.2%11.4%

So given the make up of the portfolio (I will update my portfolio page at some point this week!) I am happy with this. No, it is not as high as Vanguard but they are not bad performances.

ISA 2 (also IFA managed)

So the second ISA is the most complicated with 3 sub portfolio’s with different goals inside it. For simplicity here I am tracking only the overall performance, remembering that it also pays out income monthly. The contributions still form a significant amount of the total value of the portfolios as it goes in each month, so I continue to expect this to under perform based on my method for tracking for some years.

Performance: 4.3%4.5%

So total growth of the portfolio was not great, it did throw out a trailing 1% dividend (based on total paid over the year, and the year ending value, so again probably under representing). Given that the main aim of the largest sub portfolio is to pay our bills in retirement, this is making slow but steady progress towards that. Right now this needs to go up at least 10 fold – a huge ask over the next 8 years, but with tax refunds, any pay rises and so on going into it, I am hopeful. Its a big ask, and I honestly don’t know if it will make it or not, but you have to try!

My actively managed ISA

So last, and by no means least, how did my actively managed ISA do? I have been trying to move this to have less individual shares, and a combination of Investment Trusts and Trackers. This is still very much work in progress and will reduce the potential performance (or stop it from being so bad maybe?), but as the value of the portfolio has increased over the years I am getting less comfortable with quite such a large portfolio – I know I should have faith in my own ability but when you can read so much out there that shows passive is most likely to win, who am I to argue.

Performance: 30.9%44.7%

The dividend income was reinvested in the portfolio which helps to bolster the returns. The trailing yield was a shade under 4% which would match with the 4% SWR so if that keeps up it will put me in a good position.

I only started tracking the monthly performance of the portfolio back in June ’15 (around the time I found Mr Money Mustache) although I have tracked the annual returns for longer. I look back at where I was in 2012 and the portfolio then compared to now and I find it really hard to believe that less than 5 years later it has grown so far. I’ve evened out the growth over the years when I only tracked on the year basis, but I thought to share the progress to encourage people. It really is slow going to start with and took a long time to gain traction, and then my gamble on the Russian gold miner really turbo charged the returns along with some of my other AIM investments. I will reiterate, this is not an approach I recommend!

ISAPerformance

Going forwards there won’t be any more contributions to this portfolio for a number of years but the value should continue to go up as dividends keep getting reinvested.

Premium Bonds

So for a bit of fun I thought I would also look at the returns on my premium bonds holding. In total it returned a shade under 1.3% for the year. Whilst not huge, and I haven’t had a “win” for a while, I can live with that tax free rate of return.

Conclusion

Overall I am content with the performance over the last year, it feels like I have made huge strides towards FI. I still feel that June 2025, although a long way off, is going to be a challenge. This is not going to stop me from trying!

Looking back at 2016/2017 (tax) year

So the tax year has ended and it is time to look back and see how it went. It took me a bit longer to get this written up – partly work related, but mostly because of my ISA. On the last day of the last tax year I threw all my spare cash into the ISA, knowing full well I would need to take some of it back out to pay the visa bill. Why? Well if I can get even a few extra pennies in, it all helps, and I have a psychological barrier about taking money out from that ISA so I know I will do everything I can to avoid it.

How did it go?

So, the all important question. Looking at the financial position I am in now – I honestly don’t think I could really have asked for it to have gone any better – other than winning the big one on the Premium Bonds or lottery of course! My savings rate was poor (remembering that it doesn’t include my 10% salary sacrifice into my company pension, or my basic rate tax relief in my personal pension) for what I want, but hey, I had some great holidays, an rather large unexpected tax bill, and bought some stuff 🙂

Expenses

So, most importantly, where did all that money I spent go last year? In most expensive first order….

Housing.

So this won’t be a surprise to most UK based people, and even less so to any other Londoners out there! The mortgage (and related insurance) was my biggest expense over the year. More than double any other expense of the year, this really is the killer. Ouch. Yes, we could move somewhere smaller, further out etc. and half that – in fact if we hadn’t moved here I would be mortgage free. I wouldn’t have been happy though. There is enough space for us now to not only live as we want, but also to put up our friends and guests when they come to stay, which is very important to us. The next target will be to not need the insurance (open to a question on need but…) – however I want to feel secure knowing that if anything happened to me my other half would be ok. Once my liquid savings (i.e. ISA) are greater than my mortgage balance, or close to, then I can stop and invest that extra. I am not sure I am brave enough to just cancel it and self insure.

I really do need to think about how best to try and reduce this whilst keeping the ISA savings going – a real trick. The mortgage isn’t up for renewal for over a year, and depending on the rates it’s likely we will go for another 5 year fix, in which case the more I can do now to reduce this then the better.

Holidays.

Yes – you read that right. My second biggest spend last year was holidays – money that probably should have gone into my ISA, but I spent it on a number of holidays. Do I regret it? Absolutely not! I have some fantastic memories that will be with me for as long as my memory lasts. This isn’t something I do every year (and don’t plan to), although it is about the journey as much as the destination! Could we have done the same travelling cheaper? Without a doubt we could – we didn’t need to spend as much as we did, but heck – you only live once!

Other.

Maybe a shock for some people, but the catch all pot was the third largest. Now this includes my tax bill, as well as a one off purchase I made. I don’t expect either of these two to happen this coming year so I am hopeful that this can be a lot lower this year, but the category will remain.

The rest….

As I look through the remainder of my tracker there is no other one individual item that really springs out – with one possible exception. Alcohol. If I add up all the money I have spent on Alcohol it is rather a large number. Oh well, I enjoy it! I will try and reduce it a bit, but not sure how successful I will be!

Savings

So… then what does that do to my savings overall? Well, I’ll get the number out of the way first. My overall savings rate for the tax year was…..

16%.

Not great (add in my 10% salary sacrifice, tax credit in pension and it would go up a bit), but this was hit hard by Novembers -111% savings rate and the tax bill in December. Take those out and it would add more than 10%. But I can’t so it is what it is.

Update: After great supportive comments from both Rory and HoSimpson on this savings rate, I decided to see what would happen if I included all my bonus, company pension and tax rebate on my private pension. I don’t usually include this as to me it isn’t “real” money. The pension contributions and rebate I don’t “see” as they don’t go through my current account. My bonus this year was in my bank account for less than 8 hours before it had been transferred to my pension! So what did that do to my savings rate? It took it to a shade over 41%. Wow. That has made my day!

Across the board, all of my savings vehicles have done pretty well (a more detailed post to follow), and by a freak of timing, my bonus that went into my pension got in the pension before the tax year end, but didn’t show online when I took the snapshot. Why is that so good? It means that in effect I just lump it at the start of the year and we see how we go – I may have just invested a huge lump of cash near the peak of the market, but as I can’t get at it for over a decade, that really is kind of irrelevant).

I am disappointed in myself in terms of how little I put into my ISA last year but then that is partly down to the tax bill, the purchase and several personal circumstances that threw some curve balls (all the more reason for having the emergency fund!).

Despite the low savings rate (compared to the FI community anyway!), the markets were very good to me – more so than I ever expect to see again, but who knows.

Non Financial “stuff”

So what about the non financial stuff then? Well I didn’t set any specific goals here, so this is a bit haphazard!

Health: I am pleased that I had managed to lose a small amount of weight (I suspect I may have put it back on but haven’t braved the scales yet!) but not as much as I would like, but then I don’t put the effort in, so only myself to blame on that. Every few months I swear that I will do more exercise, but somehow I just don’t.

I’ve also been cooking even more healthily using some of the dieting cook books I have, although I still sometimes suffer from a lack of energy (consistent long working days can take their toll). Hopefully I can fix this during the course of this year

Work: So work hasn’t been going too badly – the usual ongoing challenges and work, I got a “met” on my appraisal – pretty much the best I could have hoped for to be honest as it was my first year in the new company. Sadly this meant no pay rise, but that won’t deter me. I am looking forward to the new year and throwing myself into it with gusto to try and build on my career goal of a promotion by 2020 (it is getting harder the higher up the ladder you go!). Steady as she goes. The hours are starting to ramp up again which isn’t great, and hence my posts are coming at the weekends, but it pays the bills, and that is why I get paid what I do, and the bonus I do. No overtime but they compensate for it that way I guess.

Friends and Family: So the family side has been a huge focus over the last year for various reasons, and sadly to the detriment of my friends. Fortunately I have a great bunch of friends who understand the circumstances and, so far, haven’t held it against me! I am hoping to be able to get a more level playing field this year, but who knows what may happen.

As I seem to be one of the few who only does a tax year review, I wont ask how your year was!