Aspire to retire well

​Summer draws to a close and family chat turns to foreign holidays: where you’ve been, what you’ve done, the fantastic food and drink you sampled… well, this year, perhaps not so much.

The buzz word this summer has been ‘staycation’.  UK seaside towns have been busy with folk who usually take off for warmer climes, maybe you were one of them, maybe you were under canvas, or even trying out a campervan.

This reminds me of a lovely story about a client of ours who in his retirement aspired to the freedom of hitting the road in a brand-new campervan. He achieved this and is now living his dream. 

As with holiday aspirations, retirement plans may change over time but an ambition of any sort helps you to plan and focus on achieving your goal.

Jim, who bought the campervan, had been - and still is - a longstanding client. He worked in the automotive component manufacturing industry, earning a moderate income and, over 25 years, he regularly consulted us. He changed employers several times and we advised him on his pension arrangements and investments. Together, we always had in mind his ultimate dream. We had regular discussions, providing projections of when he could afford his dream, until we reached the point when that could become a reality. This was at the age of 56 - nine years earlier than he had hoped.

​There’s no reason why Jim should be an exception. It wasn’t a matter of luck. He didn’t win the lottery or inherit a fortune. He was able to fulfil his dream by planning, by talking to us and by regularly reviewing his plans with us.

Take a moment to stop and consider your aspirations.

Research shows that the over 65s spend their money on all sorts of things that they hadn’t been able to while working.  We’ve had clients fulfil their aspirations of building the most beautiful country house, of travelling to countries they’d only previously seen on TV, of managing a winter cruise each year enjoying the break from everyday living. We’ve had clients take up new hobbies, equipping themselves with state-of-the-art cycling, sailing or fishing gear.  We’ve had clients who have managed to reach their aspiration of visiting family on a regular basis – wherever in the world.  We hear about new goals all the time and a recent aspiration to make the retirement dream list is plastic surgery.

Whatever it is you want to achieve, take time now to think about your retirement aspirations, it will help you to plan a financial route to get there.

But remember: professional advice may be useful, especially in the years leading up to retirement. A financial planner can help you work out how much money you will need to live on after and during retirement, and budget appropriately.


This article is for information only and should not be construed as advice or a recommendation. The investment strategies mentioned are examples only and may not be suitable for your particular: circumstances, tax position or objectives. Please seek independent financial advice before taking any action.

Investments carry risk, capital invested may go down as well as up and you may not get back the original capital invested.

Property Funds – As Safe as Houses?

Several clients have noticed recently that when they go online to look at their Transact accounts, there’s a message telling them that certain property funds have been suspended.

In fact, all open-ended property funds (those which can issue an unlimited number of shares) have been suspended, or gated, since March in response to the Covid crisis. This means there can’t be any movement into or out of these funds. Only two have since reopened.

At Reeves, in our main model portfolios, we advise clients to invest in three property funds: TM Home Investor, Threadneedle UK Property and BMO UK Property.

First, it’s important to emphasise that these funds have not been gated because they are in any kind of trouble. Prices didn’t collapse and there was no run on the funds. They were gated because Covid has made it difficult to value the underlying properties with any certainty. Social distancing makes it hard for valuers to enter properties to appraise them and FCA rules say that property funds must be suspended when valuers face material uncertainty over pricing 20% or more of their assets.

This rule was supposed to come into effect in September, but funds implemented it early.

Property funds were last gated in the market turmoil that followed the Brexit vote in 2016. This happened because a lot of investors wanted to sell their shares. This revealed an underlying issue with property funds: namely that real estate can’t be sold in a few days to provide investor with ready cash. Now, the FCA and property managers are working together on a solution, which is likely to involve longer notice periods for selling shares.

Incidentally, back in 2016, although TM Home performed well, others fell, but they bounced back by the end of the year to finish broadly flat.

At Reeves, we aim for portfolio diversification to achieve a sensible mix of assets for our clients and property is traditionally regarded as one of the main asset classes. Despite Covid, we still believe that property has an important part to play in a diversified portfolio and that it’s particularly suited to long term pension investments. With bonds still giving record low yields and interest rates at historic lows, property offers the chance of modest capital growth and income. The commercial property funds in the Reeves portfolios have averaged a 3.9% yield.

Property also offers a good hedge against inflation and an alternative to more volatile sectors such as US and Asian equities and high yield bonds. This has become more important in recent years as quantitative easing has made assets classes such as bonds and equities more likely to move in step.

Having said that, at Reeves we’re not doctrinaire about any asset of investment, however attractive they might appear in the short term. We buy them and hold them for one purpose only – and that is to maximise the return for our investors.

Property is no exception to this and we will be closely monitoring the market and sector over coming months, gauging the effect of trends such as increased working from home and internet commerce. We have set up meetings with fund managers to discuss how any new regulations proposed by the FCA might affect our portfolios and future strategy.

In fact, throughout the suspension of the property funds, we’ve been holding regular meetings with the fund managers to remain fully up-to-date with their current positioning and plans. Our team always balances what they have to say against a number of other moving parts: such as portfolio/sector weightings and the views of competing fund managers and forecasts of the state of the UK economy, as the property sector is closely linked to GDP and government and consumer spending.

We also regularly consult property market specialists such as agents and portfolio managers who provide valuable insights and information that we can cross reference what we’re hearing from more formal sources.

TM Home offers only residential property exposure, while the Threadneedle and BMO funds have a traditional mix of assets spanning industrials to retail and are, therefore, predominantly commercial. During the pandemic, the assets that have performed best have been logistics, medical and residential but that was unsurprising during lockdown and it’s still too early to gauge how assets prices in the various sectors are moving now.

​Much of the property market seemed like good value before the pandemic and recently we heard that some managers are now receiving the rents they missed out on over the past few months – a positive signal from the residential market. Also, more than 175,000 sellers who couldn’t operate during the lockdown are now back in the market and there are a record number of valuations and listings. In addition to that, the average asking price of any property coming onto the market in England and Wales is 1.9% higher than in March. The extension of the mortgage payment holiday will also ease pressure on property prices and encourage stability

However, the recovery of the property market fundamentally depends on the state of the wider economy and unemployment is a key driver: as it rises, it puts downward pressure on property prices. The Bank of England has said that as government-funded support schemes, such as furlough, come to an end, unemployment will soar from its current rate of 3.9% to 7.5% by the end of the year.

For commercially focused property funds, the future will greatly depend on the rate and extent to which life returns to `normal’ now that lockdown has been lifted. If people flood back to shops, restaurants and offices then the commercial sector outlook is bright. But there’s the threat of further local lockdowns and the risk that the population is reluctant to return to its old habits.

There are many factors to take into account but Reeves is monitoring them and will advise you accordingly. The fact remains that property is an asset class for the long term and not one to be dipped into and out of. It offers long term capital growth while paying an attractive yield and lowering the volatility of a portfolio. We believe it has a place in all model portfolios.


This article is for information only and should not be construed as advice or a recommendation. The investment strategies mentioned are examples only and may not be suitable for your particular: circumstances, tax position or objectives. Please seek independent financial advice before taking any action.

Investments carry risk, capital invested may go down as well as up and you may not get back the original capital invested.

Time to Look a Gift Horse in the Mouth?

“The manner of giving is worth more than the gift,’’ someone once wrote.

Certainly, in financial terms, the manner of giving can make a material difference to the value of the gift.

With financial security achieved, some of you will be fortunate enough to be able to pass some of your wealth on to your loved ones. Being able to bring forward an inheritance in this way and watch your family achieve their dreams and goals in your lifetime is thoroughly rewarding.

But, if you want to gift money to others, unless you take expert advice, there’s a danger that the taxman may also be a significant beneficiary of your generosity.

​Two Reeves clients, John and Ann Freeman are high-earning professionals, who will both have a guaranteed income in retirement from their defined benefit pensions in addition to other assets. In the event of one partner predeceasing the other, the survivor would still be comfortably off.

A review of their income and expenditure requirements and their retirement ambitions revealed that they will have more money than they need. They have decided that they want to gift some of their liquid savings to their daughter, Fiona, and grandchildren, Andrew and Emily, while they are still alive to see them benefit.

Fiona and her husband have always dreamt of moving to the countryside to be closer to John and Ann. They have been planning this for years, but have never been able to save enough. They have also tried hard to save for Andrew and Emily’s education but have never managed to put by as much as they wanted.

John and Ann consulted us on how to best to help their family. We advised them that, in broad terms, there are two methods of giving without paying tax: through a direct gift, or a trust. Both have pros and cons. Here are some of the factors to be considered with this type of planning:

  • Inheritance Tax. Through both method’s you will be reducing your estate value for inheritance tax purposes. If you survive for seven years after the gift, the gift amount will be completely out of your estate for IHT purposes. There is also taper relief, this comes into effect for survival after three years.
  • Gift Allowances. Each individual has a £3,000 allowance for gifting. If unused, you can also use the previous year’s allowance. Above this amount you are potentially subject to IHT if you die within seven years. In addition, there are other allowances a person can also take advantage of whilst not worsening their IHT position i.e. Gifts out of regular expenditure, £250 gifts and Marriage gifts to name a few.
  • Loss of control on a direct gift. Once the money is with the beneficiary, they can choose to do with it whatever they wish.
  • Source of funds. Selling or gifting assets such as shares can lead to capital gains tax. Each UK resident has a CGT allowance of £12,300 (20/21). If you realise a gain above this, you could be subject to 10% (basic rate) or, 20% (higher rate) tax. Through advice there are ways to mitigate this.
  • Bankruptcy. With a direct gift the money goes to the recipient’s estate. If they are subsequently made bankrupt, your gifted money could be lost in the process. A trust would protect against this.
  • Divorce. Similarly, if the recipient of your gift gets divorced, your gifted money could be lost. Again, a trust would protect against this.
  • State Benefits. If the recipient is receiving means tested benefits, a gift could remove their entitlement. A trust could also protect against this.
  • Gifting to minors. If you gift to a minor, the interest above £100 is taxed on the parent’s income. There are assets such as JISA, pensions and trusts to manage and prevent this tax.
  • Deliberate Deprivation. This occurs if you have ill-health and gift away significant assets for the purposes of avoiding care fees. If the relevant authorities deem you to have done this, you will still be subject to care fees.
  • Insurance. When you have made a gift, you could set-up a Gift Inter Vivos policy. This life assurance policy will cover your IHT bill if you were to die in the 7 years from making the gift.

As far as trusts go, there are several different types and we are always happy to advise on the most appropriate. As a trust is a separate entity there are different, tax rules depending on what trust you settle on. This is too wide a topic to cover here, but the important thing is to take advice before giving and we will be happy to help.

Following our advice, John and Anne gifted enough to Fiona and her husband to allow them to buy their dream home and they set up trust funds for Andrew and Emily. Now they can visit their children and grandchildren and see at first-hand how they’re benefiting from their generosity.


This article is for information only and should not be construed as advice or a recommendation. The investment strategies mentioned are examples only and may not be suitable for your particular: circumstances, tax position or objectives. Please seek independent financial advice before taking any action.

Investments carry risk, capital invested may go down as well as up and you may not get back the original capital invested.

Mindfulness – helping you make good decisions

Life is full of making decisions, and over the past 5 months people have had to make many momentous decisions and make them swiftly. This has highlighted the necessity of being able to focus, to separate thoughts from facts and to avoid fear based decisions.

At Reeves Independent, we have held in-house ‘Mindfulness for Business Success’ staff-training sessions and have been excited to see what a powerful tool mindfulness can be, particularly when it comes to making effective decisions.

We wanted to share this insight with our clients and friends who are seeking to develop their own ability to make the best decisions. So, towards the end of July, Reeves Independent, alongside Mark Sidney from Mindful Therapies, held an online evening webinar: Mindfulness for Decision Making. We were pleased to have a sizeable audience for this Webinar and have been encouraged by the feedback from our clients.

We will be holding more of these sessions in the future as we are firmly committed to helping our clients. A video of the session is available or if you think you would like to learn more about mindfulness and meditations please visit: https://www.mindfultherapies.org.uk/about-us/

In case you missed it, here’s a brief report from the session.

Mark gave a definition of mindfulness as: “paying attention in a particular way, on purpose, in the present moment and non-judgementally’’.

He pointed out that the present moment is the only moment in which we can take a decision and yet we spend a lot of time trying to look into the future or brooding on the past.

“Being able to pay attention to what is going on now can really help us to make better and wider decisions,’’ he said.

Apart from that, it can also reduce stress, enhance productivity and improve creativity, and organisations, including Google and Hewlett Packard, have been using it for several years to improve decision making.

There are three elements to mindfulness: intention; attention; and attitude. The intention is to pay attention in the present moment and then it’s a question of how we make use of what we notice or become aware of in that moment, applying a kindly acceptance and being non-judgemental.

“We are observing what we are feeling, we are observing what we are noticing, rather than reacting to it automatically,’’ explained Mark.

To settle and ground yourself for a meditation, to create space to be with yourself, you need to set your intentions, your desire for something to happen and believing that it can. It’s internally generated and is about how you want to be in the world. For example, when planning for a pension, what kind of retirement you want to have.

“So the first part of mindfulness and the first part of decision making is being really clear on your own values and your own beliefs, what you want to happen and what you want to be,’’ said Mark.

To meditate, you should adopt a relaxed sitting position, with the feet flat in the floor, your back fairly upright, with your hands resting by your side or in your lap and maybe allowing the eyes to close. Then observe your breathing and what it feels like to breath in and out, allowing the breaths to deepen slightly and keeping the inward and outward breaths of equal length. It might be useful to count to three or four on the breaths.

Soon the mind will begin to wander and you should acknowledge the thoughts without engaging with them and then, with kindly acceptance, return to the breath and the counting.

“Each time you notice that the mind has wandered, there’s a moment of awareness, a moment of mindfulness, a moment of choice, choosing each time to gently come back to the breath and back to the counting,’’ said Mark.

Next, pay a little more attention to the out-breath and the physical sensations as you release each breath and the body’s natural tendency to relax at the same time. Similarly, as the mind releases involvement with thinking, it begins to settle.

Let go of the counting and allow the breath to return to its usual rhythm and attend to what it feels like to be sitting where you are in the present moment and to any physical sensations within the body, noticing contact with the surfaces supporting you.

“Allow a sense of being held and supported, unconditionally by the chair and the ground beneath you,’’ said Mark. “Nothing to do, nowhere to go, no problems to solve, no issues to fix, right now, just giving yourself absolute permission to just be, mind resting in the body, body resting on the ground, not doing anything.’’

As you rest, bring to mind your intention and motivation, maybe reflecting on your intention for retirement and how you want to be in the world when you retire and how you want to be in the world right now and what values and qualities you want to express to the world.

Then open your awareness to the space around you and to the sounds inside and outside the room and the temperature, before opening your eyes to end the introduction to the meditation process.

“It’s being able to stop and pause and create a space between whatever stimuli there may be and our reaction, to choose our response, rather then just acting on auto-pilot,’’ said Mark.

He explained that operating on auto-pilot is something we do a lot of the time, when we don’t pay attention to what we are doing. It can be useful, allowing us to perform relatively complex activities economically. However, it can mean we miss out on many things and react to things by habit.

Reacting to habit can be due to our negativity bias or our natural tendency to focus on the negative and give it prominence. It developed in humans as a survival mechanism against threat. This instinct doesn’t distinguish between a physical and non-physical threat, it still produces adrenaline, provoking us to run, hide or fight. But, none of those things help when, for example, the stock market crashes. We still, however, make a lot of decisions based on that threat system.

The human brain also has a reward system, when we react to positive things, and a soothe system, which is our rest, repair and digest system. This automatically deals with the huge amount of data we are receiving all the time and processes it. It produces the healing hormones of oxyticin and serotonin, both of which are also produced by mindfulness.

We like to think we make decisions as the result of a logical and rational process but, in fact many of them are a result of subconscious and unconscious biases. Mindfulness enhances our ability to observe our thoughts and emotions and recognise and understand how we feel about our thoughts so we can make better decisions.

Thoughts aren’t facts and, on average, we each have about 20,000 thoughts a day and most are based on things that have already happened that we can do nothing about. We tend to think we are expert in certain things and that can lead to overconfidence, but mindfulness helps us to be aware of that and approach things with a beginner’s mind and be alive to other possibilities. We also become more emotionally intelligent by becoming aware of and recognising our emotions. We can question where a belief or thought comes from and on what facts it is based. For example, when we recognise when we are in the threat mode we can avoid fear based decisions and develop mechanisms for coming out of it.

Another mindful way to make better decisions is to avoid sunk-cost bias, that tendency in people and organisations to persist in a course of action because they have already invested so much time, effort or money in it, even though it may no longer be beneficial.

Our minds and our bodies are intimately connected and we have to listen to our bodies and pay attention to what our heart or our gut has to tell us.

“Listening to your body and noticing your emotional state, as well as your thoughts can help you to make better and wiser decisions,’’ said Mark.

A key element to bring to mindfulness is kindly acceptance of what we are experiencing in the moment, of the reality of the situation, so we can see the bigger picture and make wiser decisions.

Mark also led the webinar through a second mindfulness exercise to help choose between two options. It began with entering the mindfulness state of meditation and bringing to mind the options and then exploring, in turn, your physical and emotional response to choosing each option.

“When I do this exercise, it can often help me make a better decision, one that’s more in tune with my body and more in tune with my core values and beliefs,’’ said Mark.

He added that the more people practice mindfulness techniques the more powerful a tool it would become for them.

Mark concluded: “Mindfulness is about creating that space to just pause, listen to our bodies, notice our thoughts, to be aware of our emotions, so that we can align what we do with our inner core beliefs and values and our authentic selves. Mindfulness isn’t about clearing the mind, it’s about getting clarity in the mind.’’


This article is for information only and should not be construed as advice or a recommendation. The investment strategies mentioned are examples only and may not be suitable for your particular: circumstances, tax position or objectives. Please seek independent financial advice before taking any action.

Investments carry risk, capital invested may go down as well as up and you may not get back the original capital invested.

MAY THE FORCE BE WITH YOU

Covid 19 has been devastating in so many ways, but it has least made people concentrate on the essentials.

This includes our finances, as we’ve realised that some things we felt we couldn’t possibly do without have proved to be dispensable after all: whether that’s the cup of coffee on the way to work or regular takeaway meals.

If you can still live without some of these treats as life returns to normal, it could mean surplus income at the end of the month and it’s important that you think about what use you can put that to.

If you’re under the age of 55, with years of working life left to build on your managed funds, you’re classed at Reeves as an Essential Client, because it’s essential that you save for retirement, with money put aside now achieving so much more for you in later life.

So, it’s important to review your income and expenditure to identify how much you can realistically save.

​Compound interest is the most powerful force in the universe,’’

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Albert Einstein

This is a fundamental truth of saving. Compounding works as interest or dividends earned are added to the capital, increasing the amount on which future income is earned, further growing the pot and always building the momentum of your snowballing savings.

Last month, we identified the Growth Stage, when the foundations of your retirement fund are laid down and this is when you can take full advantage of Einstein’s powerful force - by putting money into a pension or an ISA.

For the majority of clients looking to accumulate wealth through regular savings, there are two tax efficient investment vehicles that we commonly recommend: ISAs and pension funds. Both are capital gains tax free and in both any income generated from investment is tax free. With an ISA all withdrawals are also tax free, whereas with pension, income tax is payable on any withdrawals (after a 25% allowance). However, payments into a pension fund receive a 20% tax relief bonus, with additional tax relief potentially available for higher and additional rate taxpayers. The annual allowance for an ISA is £20,000 for all UK residents; the basic annual allowance for a pension is the lower of gross relevant earnings or £40,000 but this can be affected by personal circumstances.

Let’s take the examples of two clients, Oliver and Margaret, both 45 years old.

Oliver regularly pays £100 a month into an ISA. Assuming a modest annual growth rate of 2.5%, including all fees, after 10 years, this would be worth £14,874 and, after 20 years, £30,933.

Margaret, on the other hand, pays her £100 a month into her pension fund and at the same growth rate, thanks to the tax relief, which boosts her contribution to £125, after 10 years this is worth £17,022 and, after 20 years, £38,872.

So, the returns from pension fund savings are significantly greater than from ISAs and the gap between them widens with time, but that’s not to say there is no place for ISA’s in your savings plans. The accessibility of assets in an ISA could be valuable, if you’re saving for a specific objective, such as a child’s university education.

Another advantage of making regular contributions to a savings plan is that it irons out the fluctuations of the market. Ideally, you would buy on the dips and not the peaks, but that’s extremely difficult to get right even for professionals. By investing regularly, you will take advantage of an effect called Pound Cost Averaging, which means that over time, the value of your investments should rise with the overall average rise in investment values, added, of course, to the value of dividends and interest earned - that powerful compounding force again.

If you think Reeves can help you with a regular savings plan, get in touch and we will arrange a one-to-one interview to get all the facts about your situation so that we can tailor an appropriate solution. This will result in formal recommendations in the form of a Suitability Report which we will also discuss with you.

This way, you’ll be able to control your finances and not let your finances control you.


This article is for information only and should not be construed as advice or a recommendation. The investment strategies mentioned are examples only and may not be suitable for your particular: circumstances, tax position or objectives. Please seek independent financial advice before taking any action.

Investments carry risk, capital invested may go down as well as up and you may not get back the original capital invested.

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