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Phased Drawdown – Could be the Solution

​PHASED DRAWDOWN – YOUR FLEXIBLE FRIEND

If this year has taught us anything, it’s that fate can step in and change the best laid plans. You need to be prepared for that and your pension plan ought to be able to cope with the unexpected.

Phased drawdown is a valuable tool which can give people tax efficient flexibility in the way they use their pension pots in retirement.  

The rules allow you – once you reach the age of 55 – to withdraw up to 25% of your pension pot tax free and this can be done in phases, you do not have to take this all at once.  With advice, you can choose how much to draw down each year, taking into account your personal tax allowance and any state pension, in such a way as to minimise your tax liability.

The beauty of this is that it puts you in control, giving you the flexibility to draw varying amounts each year as circumstances change.

The experiences of three different Reeves clients (names changed for privacy) during the upheaval of Covid illustrates this.

Chris Spelling, 62, was looking forward to an early retirement within the next few years, but then coronavirus struck and drove his employer into liquidation. This was a double whammy for Chris, as not only was he without any income – apart from Universal Credit – he didn’t rate his chances of finding a new job at his age.

He contacted us, convinced that his retirement plans were now in tatters. However, we had a meeting with him, via Zoom, and reviewed his financial situation, looking particularly at his major financial outgoings and anything we could cut out. He was keen to reduce his mortgage commitment. Normally we would strongly advise against using tax free cash to pay off a mortgage but, in Chris’s case, he had taken out a high interest mortgage, so it was beneficial to him to draw from his pension to pay it off. With careful cash flow forecasting ensuring his pension delivered enough income without risk of depletion, this reduced his monthly outgoings by around £1,000 a month, this enabled Chris to be able to retire immediately.

Andy Jenner, 60, works as a consultant through his own limited company and did not qualify for the government support that would have been available had he been a sole trader. He had practically no business throughout the spring and summer, but, following our advice, Andy drew down from his pension pot to see him over this difficult period. His business is now picking up again and he is quietly confident about next year. For both Chris and Andy, we were able to put solutions in place in a little over two weeks.

Pippa Graham, 62, on the other hand, was planning to retire this year and, with our advice, had worked out her monthly outgoings and what she would need to live on. Lockdown, however, also made her take another look at her plans. The lockdown restrictions meant that she couldn’t indulge her usual passions of golf, eating out and the theatre and this meant that her monthly expenditure was about half of what she had been expecting it to be. The epidemic has also put on hold her plan for a month-long trip to Australia to visit her sister and family, saving several thousand pounds on this year’s expenditure.

So, whereas, Pippa had been planning to drawdown £55,000 this year, after discussion with us, she has decided that she only needs to take £20,000. This is especially advantageous for Pippa, because this year markets fell and had she drawn money out in April, as she had originally planned, she would have been realising those losses. As it is, the flexibility of drawdown has allowed her to leave £35,000 in her pension portfolio to grow and benefit from the market’s recovery so far.

Circumstances change and a flexible drawdown allows you to change your plans to accommodate them. Every client is different with different needs – what may work for one may be different for another. Speak to us to find out!

Please note:

Investments can go down as well as up and you may not get back the original capital invested. This article should be seen as information only and not advice or recommendation. Please seek independent financial advice before taking any action.


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

Take Back Control

​For a lot of us, when financial or economic news comes on the radio or TV, it’s an invitation to go and put the kettle on.

These reports of market movements and forecasts often seem to belong to someone else’s  world. We tell ourselves that, not only don’t we really understand them, we don’t need to, because they have no bearing on our day-to-day lives.

In fact, if you’re saving for retirement, or living off retirement income, these news reports and the events behind them are highly relevant to you. What’s more: if you start to pay attention to these market events and react to them, you have it in your power to potentially enhance your retirement plans. As a Reeves client we give you the opportunity to do just that, while benefiting from our expertise and guidance.

Clients who invest in one of our Tactical Portfolios, receive frequent communications from us advising of changes in market conditions, opportunities they might want to take and a recommended course of action. These clients tend to be those who are nearing retirement and want to take advantage of short-term opportunities and the Reeves investment team daily monitors the markets for these. We might, for instance, advise a client to buy into a recovery equity fund when the market has dropped significantly in order to take advantage of any potential to outperform in a subsequent market upturn

Our Core Portfolios, on the other hand, suit clients who are generally further away from retirement and not overly interested in short term market volatility and movements. However, we monitor these portfolios as regularly as the tactical and manage them throughout the year with a long-term objective in mind. They are carefully structured so that they don’t need frequent adjustment. The client is still kept informed and consulted but fewer decisions are called for on their part than with a Tactical Portfolio.

What Reeves doesn’t offer is a portfolio for an entirely passive client, one who wants to sit in a tracker fund or a passive portfolio which follow the market under all circumstances and is never changed. Such portfolios aren’t designed to react to any short-term volatility and will never be changed for any alterations in long term goals. If the market were to fall dramatically – as in March - a passive client would have to blindly follow it.

Here’s a couple of Reeves client illustrative examples.

Robert Hunt, 61, hopes to retire in a couple of years. He became a client four years ago, when Reeves consolidated four different pension schemes he had collected over the years into a Tactical portfolio. He opted for this because he’s interested in finance and investments and follows the markets. He’s also keen to take advantage of any opportunities in the market to maximise his savings.

Another client, on the other hand, Jessica Forbes, 55, is a successful businesswoman who owns her own company. She’s familiar with finance but she’s also extremely busy running her business - too busy to devote attention to her retirement fund. She’s happy to save through a Core Portfolio at this point, but plans to shift to a Tactical portfolio in a few years’ time as she nears retirement and can hand over some of the running of her business to the management team she’s grooming.

When the coronavirus crisis hit the markets in March, Reeves’ Tactical Portfolios were overweight in cash as we had already taken a defensive position. We took the opportunity to use this cash to buy UK and global equities, which were cheap due to the market fall. In fact, we were picking up equity at almost a third cheaper. We did this at a much larger rate in our Adventurous Tactical Portfolios and since then these have grown by 26.5% since the market bottomed. Our Core annual change was scheduled for April and we switched our long-term view for our Core Portfolios and made a similar change for these and our Core Portfolios have since done over 23%.

So, it pays to engage, take part and be in control.

Please note:

Investments can go down as well as up and you may not get back the original capital invested.  This article should be seen a information only and not advice or recommendation,  Please seek independent financial advice before taking any action.


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

How Much Is Enough?

​​When it comes to retirement planning, the most important step is to decide how much is enough. In other words: how much money will you need to live on in retirement?

Once you have decided this, everything else starts to fall into place: you know how big your total pension pot needs to be and you now how soon you can give up work.

Because this is such a key element of your retirement plan, it’s well worth putting a lot of careful thought into it and, as a Reeves client, we will help you to do that. We’ll sit down with you and go over your monthly outgoings, taking into account those that will change once you give up work – or even cease altogether – and new expenses you might want to incur in retirement, such as holidays or new hobbies. We have a lot of experience in this and will be able to point out areas you may have forgotten, or have never taken account of.

Once you have arrived at a monthly expenditure figure, you know what your monthly income needs to be, but it’s important to remember that that figure is what you need after paying any income tax.

It would be possible to take this monthly figure, multiply it by 12 and then multiply it again by the number of years you hope and expect to live. That’s possible, but not sensible.

The truth is that a person’s spending requirements change as their retirement progresses. In the earlier years you will typically want to enjoy your newfound leisure: taking your dream holidays; visiting relatives in Australia; buying a classic British motorbike; learning to play the piano; or just on going out and having a good time.

However, as the years pass, spending requirements, in most cases, will lessen. Your children will be grown up and independent, you will take fewer foreign holidays, have less interest in going out or buying new clothes and you’ll drive less. You could say, you will be more content.

One Reeves client, Antony Evans (name changed), came to see us when he was 62 to discuss his retirement plans. Together, we calculated that initially, he would need an annual income of £30,000, after tax. This would allow him to fulfil some long held travelling ambitions, such as a tour of South America and to play some of the world’s best golf courses.

When he reached the age of 66, he would qualify for the state pension of £9,000 a year, so the annual withdrawal on his private pension pot would be reduced to £21,000 a year. He would continue to draw this until he reached 75, by which time he believed he would have seen all those parts of the world he had wanted to and he would be happy to confine his golfing to UK courses. Then, he would only need £22,000 after tax, so, with the state pension, he would have to draw £13,000 from his pension pot each year.

Five years later, aged 80, he accepts that he will probably have given up golf altogether and would only be going on holiday in the UK, so his income requirement will be just £15,000 a year, which, after the state pension, only calls for £6,000 a year from his pension pot.

Once we had had this conversation with Antony and ran some projections for him, he realised that, with his pension savings of £450,000, he would be able to retire immediately at the age of 62, two years earlier than he had hoped – a pleasant surprise.

Every individual is different and so are their spending requirements. We recognise that at Reeves and we draw up a bespoke plan with and for each of our clients. As part of our service, for every client, we conduct a retirement planning review once a year and twice a year if retired, where we provide projections on how much money they need and how they can afford it.

This article should be seen as information only and not advice or recommendation. Please seek independent financial advice before taking any action.


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

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.

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