Who wants to be a Phoenix Millionaire?

There are two easy ways that you can become a Millionaire overnight. If you are incredibly lucky you can win the lottery (we deal with these people and they aren’t always happy) and if you are incredibly bright, you can go on that well known gameshow. For the rest of us it is still possible and working at Phoenix can help you hugely.Let’s imagine a scenario where you join Phoenix at age 25 on a salary of £30,000. You read some guides which tell you it’s a good idea to make pension contributions, utilise tax-efficient savings such as the Share Incentive Plan (SIP) and risk-free investments like a Sharesave. So, you do the following:

  • You know that Phoenix will contribute 10% of your salary to a pension if you contribute 2%, but you also know that Phoenix will match an additional 2% if you increase your contribution to 4%. You therefore increase your pension contribution to 4% with Phoenix contributing 12%, giving a total pension contribution of 16%. You make the contributions via salary sacrifice and you therefore have given up £68 of take home pay in exchange for £400 into your pension every month.
  • You make use of the SIP and you maximise the full £150 per month and Phoenix match the first £50 of your contributions. Like pension contributions, as these are deducted before tax and national insurance, you have given up £102 of monthly take-home pay in exchange for £200 of Phoenix Group plc shares.
  • You read about the Sharesave scheme and like it’s risk-free nature. However, as you are aware that you are maximising your SIP contribution and although you believe in the work Phoenix does and believe the share price will increase, you do not wish to have too many of your eggs in one basket. You therefore choose not to maximise this, but you still invest £200 per month into this.
  • You know that Phoenix offer a Cushon ISA so you decide to also contribute £200 per month to this and invest this into a suitable investment fund.
  • Therefore you are investing £1,000 each month, but this has only cost you £570 of take-home pay (a 75% return before any investment growth).

You do the above steps and then you forget about your investments for 30 years and live your life. Over this time, you receive yearly pay increases of 2.5% (which leads to more being invested in your pension each year) while your investment funds and your Phoenix Group plc shares return on average 6% per year. You decide when you get to age 55 to check how your investments have done and you’re surprised to see you’re a millionaire, with your investments valued at £1,150,000! You think to yourself ‘this seems a lot, I only started investing £12,000 per year, is this a mistake?’ Luckily, it isn’t a mistake and it’s due to the power of compounding. What has been happening in the background while you have been busy living, is your investments have been acting like a snowball rolling down a mountain. At first, the snowball isn’t very big as it’s just made up of the initial snow to start it off. As it gradually rolls down the mountain the snowball gets bigger and bigger as it starts to pick up snow. The further down it gets, not only does the snowball get bigger as it picks up more snow, the rate at which it gets bigger increases too and you’re left with one giant snowball at the bottom. You can see this effect with your investments in this graph:

At age 35 (over the first 10 years), your investments are worth £190,000. Over the next 10 years the snowball begins to pick up speed as your investments grow by a further £330,000 to be worth £520,000 at age 45. Over the final 10 years the snowball is now at full speed and your investments grow £630,000 to reach the final total of £1,150,000. This is an illustration of what can be achieved by using your staff benefits that are on offer to you at Phoenix despite earning a relatively modest salary, in tandem with having a disciplined savings plan which you can and do stick to. It’s important to remain consistent and disciplined as investments do not always go up in value. It’s very common for investments to be flat or even fall in value over months or even years, and it’s during these times it can be psychologically challenging to keep to your strategy. If you do, history has shown investments can and do recover and the long-term rewards of staying invested can be life changing.

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