SUMMER 2016 ISSUE 3 WWW.AVANTISWEALTH.COM

Are ISA savers missing out?We look at why 92% of savers are only using a fraction of their annual entitlement - pg 10

5 classic cars that define cool!With a new car park investment

opportunity our team selects a classic car to park in it - pg 6

Is a final salary pension transfer right for you?Thinking the unthinkable, why

transferring from defined benefit to defined contribution scheme is gaining

momentum - pg 12

Is the London property market set to crash?Our special report offers insight into the London property market, as the price gap with the regions reaches an all-time high - pg 2

THE CLIENT MAGAZINE FROM AVANTIS WEALTH

How you voted:35%Strongly Agree orAgree

30%Neither Agree orDisagree

35%Disagree orStrongly Disagree

Quarter in 12 Words

• BHS ENTERS ADMINISTRATION

• BANK HOLDS RATE

• OBAMA BREXIT BACKLASH

• QUEEN TURNS NINETY12HAVE YOUR SAY - RESULTS

Inside this issue:Investment Director Paul Beard shares his alternative viewPage 1

Is the London property market set to crash?Page 2

5 classic cars that defined cool!Page 6

Manchester car park investment opportunityPage 7

Who would launch a loan company at the height of the credit crunch? Interview with Alex Mollart CEO of 1st Stop ReservePage 8

Consumer finance investment opportunityPage 9

Are ISA savers missing out on the full tax savings opportunity?Page 10

B2B bridging finance investment opportunityPage 11

Is a final salary pension transfer right for you?Page 12

With the Brexit vote drawing near and with the polls still showing a slight lead for the remain campaign, we asked if you agreed with the following statement:

“Staying in the EU will be good for the UK”

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THEALT-VIEWINVESTMENTCOLUMN

Are fund charges eating into your returns?

If your investment returns average in the range of 2% to 3% annually, then chances are the charges you get hammered for as a fund

investor; circa 2.5% annually, will put pay to any real returns. Take other factors such as inflation, then over time, you’re looking at losses rather than gains. The high and often hidden charges you have to pay your fund managers can have a significant negative impact on your financial goals; like early retirement. So what are the charges you face as a fund investor – and how can you make sure that you’re getting value for money?

What investment fund charges will you face?Funds levy an Annual Management Charge (AMC), from which they make their profits and cover the ongoing annual costs of running the fund. The AMC is typically made up of a number of different costs, and averages to around 0.75% in most actively managed funds. The charge differs from fund to fund but, generally, the funds that invest in riskier assets, like equities and property, will have higher AMCs than their lower risk counterparts, like corporate bonds and gilts. But the AMC is not the total cost that you pay on a yearly basis.

What is the ongoing fund charge? A more realistic indication of the true annual cost is a measure called the ongoing charge figure (OCF). This includes the AMC, as well as a number of additional costs such as trustee and auditor fees, which are taken directly out of the fund. These extra charges can easily amount to around 0.1% on top of the AMC. Fund managers are legally obliged to show the ongoing charge in their fund literature and they must publish it once a year. It can be found in a document called the Key Investor Information Document (KIID).

How fund charges have changed Traditionally, fund charges were even higher than they are now as they were beefed-up by commissions that were passed to financial advisers and investment brokers such as fund supermarkets. The typical AMC in the old world was 1.5%. But new rules introduced in 2014 have made fund charges more transparent, which in turn has seen some funds get cheaper. The charges for investing are now split between the funds, and the people that sell them. Fund managers charge you one fee, and financial advisers and brokers charge you another. So, a fund's annual management charge could now be 0.75%. If you take financial advice, you'd then pay a separate fee to a financial adviser, and another to the website through which it buys investments on your behalf. If you don't take advice, you pay a separate fee to the broker through which you buy your funds. This could be a percentage of the amount invested, or a flat fee. Initial charges, mostly, are no longer applicable.

Other costs of investment funds While for the time being the ongoing charge is a good indicator of annual charges, it’s, unfortunately, not the whole picture. The transactions that

fund managers undertake within their funds – the buying and selling of different assets – all incur costs, like trading fees, commissions and stamp duty reserve tax on UK shares.

Regulators carried out a study into this in 2005, and found that an annual turnover rate of 100% (all assets in the portfolio had been bought and sold in one year) would cost you an extra 1.8%. Add that to the average ongoing charge of 0.85% and you're looking at annual costs of more than 2.5%! Of course, the trades taken by the fund could boost your returns by even more and a good manager wouldn't spend money on the trades without thinking it would enhance performance.

Is there an alternative? If you’ve tired of the performance issues and charges incurred through traditional unit trust investments, then perhaps it’s time to explore the twenty-five strong Avantis Wealth investment portfolio that typically offer net annual returns of 6% to 12%. Our fee structure is simple; there’s an administration fee, and if you invest via your pension then there will be SIPP or SSAS annual charges; the rule of thumb here is these compare favourably to fees incurred in unit trusts, OEICs, and investment trusts.

Visit www.avantiswealth.com/investments to see our current investment portfolio.

Paul Beard, Investment Director, Avantis Wealth

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Is the London Property Market set to crash? Back in the 2008 financial crash, UK property prices came back down to earth after their long upwards trend that began during the late 1990s. All UK regions were hard hit and in some parts of the country, prices are still below their 2007 peak. This is definitely not the case in London!

The Nationwide provides some of the most comprehensive house price data available. The chart above shows prices both in London (in blue) and for the whole of the UK (in red). London property has always been a lot more expensive than the rest of the UK but plotting the two against each other shows just how significant the gap between the two has become.

Indeed, last year the premium paid for the average London property compared to the average house in the UK hit a record level of around 140%, according to the Nationwide. Prior to the last housing bust in 2007, the premium hit a peak of around 70% before falling back to around 50% at the trough of the market in 2009. This can’t go on. Even Nationwide’s chief executive while quickly adding that he wasn’t forecasting a crash, warned last

November that “there will come a point when people in London can’t afford to buy.”

Prices in London have skyrocketed since the 2008 financial crisis, driven by factors ranging from, the influx of foreign cash, the ‘safe haven’ status of the UK during the Greek precipitated eurozone crisis, the pound’s relative weakness, London’s general appeal as a global city and the favourable tax regime under

Source: Nationwide

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which in the six years to 2015, £100 billion worth of property was bought by foreign investors.

The gap highlighted in the graph might be understandable. Following the financial crisis, in many ways, housing in London looked like the perfect investment. A weak pound and a stable, light-touch tax regime encouraged foreign money to flood into the capital, snapping up the most tangible of assets: bricks and mortar. Limited supply and a more general sense of “buyers’ panic” when rising prices create their own momentum, with people rushing to buy before they rise even further saw prices shoot up.

However, anyone who believes in ‘reversion to the mean’ the phenomenon whereby prices that

get out of line with their long-term average tend to return to it, often rapidly, will already be wondering when that gap might close. And there are indications that the time for the gap to close has already arrived.

Demand has created its own supplyDespite all the protestations about a mass housing shortage, high prices are already encouraging a response from developers. In many ways, the extent of the over-supply is difficult to overstate, for example, take data published last year. According to the research, there are more than 50,000 new homes planned or under construction in London in the ‘million pound plus’ bracket. The vast majority are two-bedroom flats.

To put the this into context, in the same areas of London in 2014, only 3,900 homes were sold in the same price bracket, that potentially puts supply at 14 times annual demand! This is a staggering statistic. Perhaps unsurprisingly as more of this supply comes to market, problems in the new-build sector are already on the increase with signs that sales are running into trouble at an increasing number of developments.

One problem is that many of these properties are being sold to foreign ‘off-plan’ purchasers. Many of these bought when emerging market currencies were strong against the pound, but the commodities collapse has put paid to that. So when the flats are finished they will have to pay the bulk of the purchase price and with the collapse of emerging currencies that final payment will be much higher than they originally expected. So they’ll be selling up before they have to pay the balance of the price.

The Sunday Times has picked up on this worrying story. Cross the river from the Pimlico to south London, turn on to Nine Elms Lane and you will find yourself in a mile long building site, says Oliver Shah in the paper. What you won’t find is very many people!

Five years ago, ‘Singapore-on-Thames’ as one leading industry

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commentator refers to it, was held up as ‘the brightest spot in London’s construction boom’. Now its 18,000 homes and two new tube stations exemplify a ‘glut of supply and shrinking demand’. Selling prices in the SW8 area fell 7% last year according to LonRes and some 28% of unsold properties have been on the market for over a year.

Battersea Power Station, meanwhile, is being converted into a sprawling new housing complex, whilst the recently completed Vauxhall Tower, overlooking Vauxhall Bridge, is Britain’s tallest residential building. 50 storeys high, it has 223 flats. According to LonRes, the number of properties for sale in SW8 has rocketed from around 400 per month two years ago to as many as 2,000 per month at the moment, an increase of five times. Crossrail will make once uncommutable areas of London more feasible, bringing yet more supply into the market.

In this sense, the current bubble in London’s property market very much resembles the pre-2008 period. Many of the factors that drew foreign investors into the market have now gone into reverse. High commodity prices and strong currencies in emerging markets, which helped to

push foreign buyers into London property, are a thing of the past. China’s economy is also slowing and its stock market has crashed.

The well-healed of the high-end residential market is not as nearly well off as it was; no Russian oil billionaires are going to spend £50 million on a penthouse overlooking Hyde Park this year. Quite the opposite; they are more likely to be distressed sellers. The unwinding of the global credit bubble can take London house prices down with it just as easily as it has taken down the UK’s steel mills.

No longer a welcoming tax havenBut this is about more than just supply, the Chancellor George Osborne has also taken aim at house prices in London, which are politically unpalatable. He hit the market with higher rates of stamp duty for houses worth £1.5 million plus and has said that anyone buying a second home will pay 3% extra. Both measures are designed to discourage buyers from overseas.

London used to be lightly taxed by international super city standards.

Add the deep cuts in tax relief on buy-to-let interest and that is no longer the case. On one hand you have over-supply while on the other you have a growing number of factors weighing on demand. It is clear that this bubble may be about to find its pin and when it does it will have an immediate effect for house prices across London, as false perceptions of mass housing shortage unravel.

Evidence suggests that prices may have already peaked. According to a report last September by Bloomberg and LonRes, almost a third of all properties on the market in London’s Nine Elms district had been on the market for more than a year. That compared to just 12% in the best parts of London, the clearest possible sign that new developments are already beginning to fall flat.

Meanwhile some developers are offering to pay stamp duty taxes for buyers, while others are offering generous deals on furniture packs. Hardly a sign that demand is rampant. In fact, it suggests quite the opposite: the construction boom has overtaken demand and real price falls rather than just gimmicks will surely follow.

Is there any way to profit from this? For the London buy-to-let investor there may be time to exit before the anticipated correction by taking advantage of a select range of ‘hands-off’ property-backed investments that are non-correlated to the thrills and spills of the London property bubble. Opportunities range from a specialist care home in Hartlepool offering an attractive 18% over 18 months, to residential development across Germany offering 60% over 5 years.

At Avantis Wealth, we use our unique F.R.E.S.H. Investment tool to choose the best of the best alternative property-backed investments, that typical offer fixed rates of return between 6% to 12% p.a. These investments offer certainty with the powerful effect of compound returns over the uncertainly of the strength and depth of the looming London property correction.

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Next Steps

Contact us to find out how we can deliver consistent returns across a range of high performing opportunities available for cash, pension and ISA investment

vehicles call +44 (0)1273 447299 or email invest@avantiswealth.com

You can download fact sheets for all our investments including the

latest additions to our portfolio at www.avantiswealth.com/investments available to Access All Areas members only.

Property-backed investment opportunities

Specialist Residential Care HomesMinimum £10,000 Fixed return 18% for 18 months Secure asset-backed investment

German Listed BuildingsMinimum £10,000 10% per annum 2 and 5 year options available

Residential Gated CommunityMinimum €20,00020% return2 year term

Cape Verde Five Star Resort Minimum £10,0007% assured return5% guaranteed net rental yield5 year resale option

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5 CLASSIC CARSTHAT DEFINE COOL

The editorial challenge this issue was a tough one! How to set the scene and make a car park space investment opportunity in Manchester seem really exciting? So I invited the Avantis Wealth team members to a theoretical game of which classic car from the 1950s and 60s they would choose to park in this simple, secure passive income car park and why!

1. 1964 ASTON MARTIN DB5

Gavin O’Brien – Marketing Director. As the editor of Astute Investor my choice was the Aston Martin DB5. Why? The name’s Bond, James Bond. Need I say more? Safe to say that the only thing faster in 1964 was probably 007’s chat up lines!

2. 1962 FERRARI 250 GTE

Paul Beard - Investment Director. I spend quite an amount of time travelling to client meetings, so for me it has to be the Ferrari 250 GTE. This was the sports car for the man who needed a family car to drop his children off at school. Why? It combines beauty and practicality with effortless style!

3. 1961 JAGUAR E-TYPE

Tobi Ford-Western – Senior Investment Broker. The Jaguar E-Type gets my vote, launched to wealth of universal praise, the Jaguar oozes 1960s cool personified. Why? Enzo Ferrarai called it “The most beautiful car ever made” – so who am I to to disagree!

4. 1966 LAMBORGHINI MIURA

Adam Saunders – Senior Investment Broker. Not an obvious choice in the face of stiff competition but this is the car for me. Why? This is the Italian car that inspired a whole generation of ‘lets strap a couple of seats onto a rocket’ sports car idea!

5. 1957 MERCEDES 300SL GULLWING

Rod Thomas FCA – Managing Director. For me it has to be a Mercedes and it’s not just the doors that make this the coolest car. Why? This was the fastest production car on the road when launched, so travelling to client meetings would be a cinch!

This is an opportunity to invest in a car parking space offering up to 9% per annum with the potential for capital growth. The spaces are located in a landmark office building featuring a modern exterior and quality commercial property space managed by Regus, the global leader.

The building has recently undergone an extensive programme of external and internal refurbishment to deliver high-quality office space. The accommodation is configured in a flexible open-plan arrangement and has been designed to facilitate subdivision into a wide range of suite sizes to suit individual occupiers starting from approx. 1,367 sq. ft. There are 175 spaces to support 350 desks; a simple case on onsite demand to limited supply.

The location and captive market

The wider area surrounding the offices has poor parking availability and is not likely to offer a viable alternative to tenants of the serviced offices. The site is close to the Manchester tramway, a benefit in attracting junior staff, with easy access to the motorway network around Manchester.

About Regus

Regus is a multinational corporation that provides a global workplace. As of June 2015, it operated 3,000 business centres across 120 countries. Founded in Brussels in 1989, Regus is based in Luxembourg and has 6,500 employees, is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.

Regus allow their customers to concentrate on their core business, and use their talents to best effect, be they the largest global corporate or an entrepreneur with an idea. Regus help them be more flexible, more cost-effective and more agile – and better able to face the unexpected challenges of business in the 21st century.

The involvement of Regus in managing the serviced offices above the car parking spaces, will maximise occupancy of the spaces in this Manchester based investment opportunity.

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Why we like it:

“The key driver fordemand is the Regus managed servicedoffice space above.”

Highlights

• Minimum £20,000• Fixed return year 1: 5%, year 2: 7%

year 3: 8% years 4 & 5: 9%• 99 Year lease• Structured exit strategy• Income paid six monthly in arrears

Next Steps

Request the full investor pack for this exciting new car park investment opportunity.

Call our investment broker team on +44 (01273 447299 or complete the form at invest.avantiswealth.com/manchester-car-park

New Investment Opportunity Manchester Car Park

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Who would launch a loan company at the height of the credit crunch?

The growth of the 1st Stop Group; an interview with Alex Mollart, CEO of the 1st Stop Group.

The 2008/09 financial crisis and subsequent credit crunch were interesting times. We were running a loan brokerage when overnight all our lenders withdrew from the marketplace. For consumers, it was just as bad. Even if you had an impeccable credit history finance was hard to obtain, and for anyone with the slightest blemish on their credit file, there were absolutely no lenders either with funds or the interest.

We made the brave decision to do what everyone else was running away from, to provide our credit facilities to people who had a less than perfect credit history. Our vision in 2009 was that if we could be one of the very few lenders to operate successfully in such a challenging marketplace, then as the credit crunch eased we would be in prime position to capitalise on a vacuum in a potentially massive marketplace.

We knew that we had expertise in identifying our target customers and were successful at weeding out applicants where we had concerns. This expertise is still prevalent throughout the group today, and in financial terms, it translates to remarkably low arrears rates across the whole of our loan book and a write-off rate of less than 1.3% per annum.

In the beginning, we lent the money we could raise from family, friends, and private investors. Even

today where we have significant institutional and wholesale bank facilities we still raise money from private investors albeit this is blended with bank finance. We pay attractive fixed rates of returns to investors up to 10.75% p.a.

Fast forward two years and the ‘Challenger Banks’ entered the UK marketplace, providing new sources of wholesale finance. This was partly because we had grown to a size to interest these banks and also because the general environment for credit had eased. However, the number of hoops we had to jump through to raise money through this new source was staggering.

Today we get approached by banks and other financial institutions looking to provide us with credit facilities. This is a tribute to the way we manage our business as they see us as a safe and reliable way to generate returns on their capital.

We welcomed the introduction of regulation to the consumer credit marketplace and believe that the weaker and less scrupulous providers have been and will continue to be rooted out; never to be seen again!

All our operating companies are regulated by the Financial Conduct Authority and as a group, we comply with European Mortgage Credit Directive. The whole process of becoming regulated has been quite a journey but a good one, and we are a better organisation for it.

We have never lost track of the fact that running any business, even a finance company, is not all about money. I greatly value the efforts and contribution of all the people working within the group. We started with a small team, many of whom are still with us, but the small team now numbers well over 100, and we are still growing.

We try to run a highly principled organisation. We respect people, both employees and customers alike. We want the way we treat them to make us stand out from competitors, and we have formed sustainable links with those who shape our regulatory and business environment.

We believe it is possible to have a culture that is sensitive to our customers’ needs and yet is performance-oriented and focused. As an example, we believe that supporting our customers through dedicated personal account managers makes a significant alternative to the faceless call centre environment of many organisations.

We have strong cultures and values which we embed into all group businesses. Our consumer lending business has embraced the Financial Services Authority’s ‘Treating Customers Fairly’ initiative. We have also made its principle a particular focus for our training and have embedded this within our remuneration policies at all levels.

The wholesale credit markets have opened up and we can now finance a range of new lending initiatives. As a highly successful and streamlined business we are well placed to fill the vacuum in the marketplace, with relatively little competition. With major new distributors ready to come online, we are now perfectly poised to reap the benefits of our early struggles through the credit crunch!

Potential investors interested in our business model should see page 9 for details.

This is an opportunity to invest in a range of loan notes offering fixed returns between 7.75% and 10.75% over 2 to 5 years. The company is a specialist consumer finance company. Put simply they lend to sincere people whose historic circumstances have resulted in a less than perfect credit history. This “historic” profile denies them mainstream credit facilities as many high street banks seem unwilling to lend to anyone without a ‘prime’ credit rating.

There are a number of high profile providers of credit operating in the adverse-credit market, there are few providers for consumers who credit ratings fall into the ‘near prime’ bracket. This leaves a large, growing and under-served segment of the market. With a diverse product range the company markets in this space. The company aims to be the leading provider of credit facilities in the near-prime market.

Home Loans, Car Finance and Personal Loans

The three main areas of lending to consumers are home loans, car finance and personal loans. The company is growing and expanding its product range including home improvements, micro-mortgages, caravan and motorhome finance and finance for motorbikes.

They employ a robust and thorough underwriting process that combines a detailed assessment of a customer’s credit history along with a structured interview with a member of their UK based underwriting team. If approved the case file is then checked independently before being handed to a collector, who will then contact the applicant again to conduct a final verification. A collector has the authority at this stage to decline a loan and only if the collector is satisfied is a deal disbursed.

Blended Financing

The finance model for the company involves blending cheaper bank finance with other funds raised from a variety of sources including high net worth individuals. The split is approximated 70% / 30%. By blending the funds, the costs of the money is circa 9.2% while the typical annual interest rates for the loans are personal loans 49.29%, car finance 38.0% and home loans 31.11%. In the last financial year, the value of loans transacted was circa £25m. The company is looking to raise £20m to £30m over the next 12 months.

Why we like it:

“Investor friendly loan note with flexible income payments and multiple investment terms.”

Highlights

• Minimum £25,000• Income paid monthly, quarterly or annually• SIPP, SSAS approved

Next Steps

Request the full investor pack for this exciting new investment opportunity.

Call our investment broker team on +44 (01273 447299 or complete the form at invest.avantiswealth.com/consumer-finance

New Investment Opportunity Consumer Finance

Fixed returns

7.75% p.a.

8.75% p.a.

9.75% p.a.

10.75% p.a.

Term 2 years 3 years 4 years 5 years

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Are ISA savers missing out on the full tax savings opportunity? Individual Savings Accounts (ISAs) have been a mainstay of the savings landscape since April 1999, replacing Personal Equity Plans, but while they remain popular, many millions of savers are not making full use of their annual ISA allowance, missing out on the maximum tax savings opportunity.Recent analysis of HMRC data shows that of the 13.8 million ISA account-holders in the UK, 12.7 million (92%) are only using a fraction of their annual tax-free allowance, while 88% are using up to just over half.

The under investment in ISAs is simply not explained away by low levels of disposable income, as this has been rising strongly following the financial crisis of 2008/09, but is principally caused by the financial services industry’s failure to deliver ISA products that perform consistently.

The number of ISAs opened has fallen in recent years, just under 13 million ISAs were opened in 2014/15 – down from 13.5 million in 2013/14 and 14% down on the 15.2 million ISAs opened in 2010/11 when numbers peaked.

The main drivers for savers choosing to under-invest in ISAs, is the poor quality of existing ISA products – which often come with high fees and annual charges attached to them significantly contributes to low net annual returns.

With so many obstacles discouraging saving through traditional ISA products, it is little wonder that people are not taking advantage of their full ISA allowance, currently £15,240 for tax year 2016/17 – the wealth management industry needs to do more to encourage savers. And with this foremost in our mind, Avantis Wealth launched a select range of ISA friendly investments in 2015.

The key feature of all the investments we offer is the fixed rates of return. If you achieve the same or very similar investment performance year in – year out - then you will benefit from the power of compound return. This in the words of Albert Einstein is the eighth wonder of the world! As the table below shows, if a £10,000 ISA investment returned 8.75% each year over five years – the results are quite extraordinary!

Year 1 Year 2 Year 3 Year 4 Year 58.75% 8.75% 8.75% 8.75% 8.75%£10,875 £11,827 £12,861 £13,987 £15,211

So where can I get 8.75%?Say no to poor rates of returns and high charges and yes to the power of compound returns. See next page for full details!

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This is an opportunity to invest at 8.75% for 5 years with an innovative loans company with a market capitalisation of £10m. The company has a simple business model, lending through three wholly owned subsidiaries offering cash flow, finance and investments and bridging loans.

The company, which is a Plc, has been strategically formed to add value to the companies it supports. It is a team of business builders whose individual experience encompasses finance, operations, marketing, product development and sales. This enables the three subsidiaries to provide a personable and knowledgeable underwriting service that was described by an existing customer who simply said, ‘it’s like business banking used to be.’

The people behind the company are passionate about finance and enhancing UK business. Their objective is to help to bridge the corporate funding gap and stimulate the growth of UK business.

Subsidiary 1 - Cash flow loans are available to established UK limited and LLPs that are keen to grow facilitated through a secured flexible revolving credit facility as an alternative to a bank overdraft or business loan. Credit lines are between £10,000 and £500,000 and operate in a similar way to a bank overdraft.

Subsidiary 2 - Finance loans and investments subsidiary takes an equity stake in the company in conjunction with longer term loans, with repayments to suit the individual company profile. Typically these companies will have demonstrated the ability to invest, grow and successfully manage their existing cash flow credit facility.

Subsidiary 3 - The bridging loans subsidiary specialises in providing funding to the commercial property sector. The funds are always 100% secured against real assets and supported by additional security. Funding solutions are between £50,000 to £500,000 and are only provided to experienced, solvent commercial borrowers. The company won the Client Choice Award for Best Commercial Property Lender Corporate Live Wire 2016 Financial Award.

The debentures on offer relate to the bridging loans subsidiary. Available to cash and ISA investors only.

Why we like it:

“This innovative PLC has a vastly experienced management team”

Highlights

• Minimum from £5,000• Fixed return 8.75% for 5 years• Winner of Client Choice Award 2016• Listed on recognised exchange• Cash and ISA investment only

Next Steps

Request the full investor pack for this exciting new ISA investment opportunity.

Call our investment broker team on +44 (01273 447299 or complete the form at invest.avantiswealth.com/b2b-finance/

New Investment Opportunity B2B Bridging Finance

Is a final salary pension transfer right for you?

Perceived wisdom once stated that if you were fortunate enough to have a final salary pension, then as the gold standard

of the pensions world, a transfer out was unthinkable. But thinking what was once unthinkable has been gaining widespread attention following the recently introduced pension freedoms.

There are several factors behind this interest; many schemes are now offering transfer values higher than the historical average. Clients are finding the new pension freedoms in a defined contribution scheme highly attractive including full access to funds, increased flexibility over how and when to take income and the ability to pass on to future generations any remaining funds after death.

At Avantis Wealth we have seen the numbers of people looking into transferring out of final salary surge over the past twelve months or so. For some, staying put with their final salary scheme is absolutely the right thing to do, while those in the public sector are prohibited from a transfer out of unfunded schemes. However, for others there are situations

where with the appropriate independent financial advice for a transfer out merits positive action. We find that there are two distinct client groups:

Firstly, some people have a deferred final salary benefit and are a long way from retirement. Here critical yield is a factor, as it helps indicate what kind of investment return is needed to match the benefits being given up. While there are always exceptions, in many cases the required yield will be too great. So for those with substantial benefits, any weakness in the sponsoring employer’s ability to support the pension scheme is definitely worth taking into account.

Secondly, the situation for those transferring to take immediate benefits is different. In these cases, a critical yield is a lesser factor or indeed irrelevant if the transfer is taking place at the scheme retirement date. The key in these circumstances is a comparison of the benefits being given up compared to those available in the new arrangement.

There are a number of reasons that could indicate a transfer may be suitable:

• The ability for family members to inherit the entire remaining pension fund free of inheritance tax is a strong driver for many, compared with the often poor level of death benefits available for a final salary member.

• Similarly, people who are single have the ability to re-shape death benefits to suit their individual circumstances, which is preferable to an irrelevant benefit automatically provided by the scheme. Final salary schemes also lack flexibility, so a transfer out can give income flexibility and tax planning opportunities.

• Add in the potential for greater amounts of tax-free cash and possible health issues, and there are a range of reasons why a transfer may be worth exploring.

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"...we have seen the numbers of people looking into transferring out of final salary surge..."

"The ability for family members to inherit the entire remaining pension fund free of inheritance tax is a strong driver for many..."

"...any weakness in the sponsoring employer’s ability to support the pension scheme is definitely worth taking into account."

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A move from a defined retirement benefit to the uncertainties and risks inherent in income drawdown is a huge step. However, some of the uncertainties can be mitigated by choosing the right investments to hold within the replacement scheme. For many of our clients either a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS) offers the flexibility to hold the type of alternative asset-backed investments that we offer.

We use our F.R.E.S.H, Investment criteria to identify our select investment portfolio that typically offer fixed returns of 6% - 12% annually. Many of the investments we offer can be held with a SIPP or a SSAS pension arrangement. Knowing the income, you will receive in years ahead is the key benefit that both you and the independent financial adviser will take into consideration when deciding whether or not a transfer out is appropriate to your circumstances. And as already highlighted, if leaving a meaningful inheritance for your loved ones is a priority, then a SIPP or SSAS will allow you to plan for this, whereas staying with your final salary scheme will not. Final salary transfers are gaining increased attention and although there are risks for both advisers and their clients, there are certain situations where a transfer can be the right decision and great client outcomes can be delivered in the right circumstances.

How do I find out if a transfer out is right for me?The first step is to take advantage of the complimentary pension review. The pension review will show you:

• The performance of your fund

• Costs and charges you are incurring

• The current value of your pension fund

• Your possible income on retirement if you make no changes

As a result, you will be in an informed position to explore options and make good decisions about your future in retirement. Request your pension review now by calling +44 (0)1273 447299 or by completing the form at http://www.avantiswealth.com/pension-review

Please noteThis article is not to be deemed as advice. It is the writer’s personal opinions. No decisions should be made based on the contents of this article but further professional advice should be sought from a regulated financial advisor.

Have your say!

We seek your views on the current hot topic of Final Salary transfers. Do you agree with the following statement? ‘New pension freedoms will make me think about a Final Salary transfer out’

- Strongly Agree- Agree- Neither Agree or Disagree- Disagree- Strongly Disagree

Vote now at: Vote now at: http://bit.do/FinalSalary

We’ll publish the results in the Autumn edition of Astute Investor.

14

Rod Thomas and Avantis Wealth Ltd are not authorised or regulated by the Financial Conduct Authority (FCA).

Rod Thomas and Avantis Wealth Ltd does not provide any financial or investment advice. We strongly recommend that you seek appropriate professional advice before entering into any contract. The value of any investments can go down as well as up and you might not get back what you put in. You may have difficulty selling any investment at a reasonable price and in some circumstances it might be difficult to sell at any price.

Do not invest unless you have carefully thought about whether you can afford it and whether it is right for you and if necessary consult with a professional adviser in accordance with the Financial Services and Markets Act 2000. These products are not regulated by the FCA or covered by the Financial Services Compensation Scheme and you will not have access to the financial ombudsman service.

Information is provided as a guide only, is subject to change without prior notice and doesn’t constitute an offer of investment. Some investments may be restricted to persons who are high net worth,

sophisticated or professional investors or who take independent advice from an authorised independent financial advisor.

This document represents the opinions of Rod Thomas and not necessarily those of Avantis Wealth Ltd. All information is supplied in good faith but no liability is accepted for mistakes or errors. There can be changes to the tax situation, economic and political landscape that may invalidate or change statements made herein.

Disclaimer

Contact UsExisting clients

If you’re an existing client and you’d like to review your current investments or discuss possible new investments, direct or via pension or ISA please call the client services team on +44 (0)1273 447308 or email invest@avantiswealth.com

Prospective clients

If you’re a prospective client and you’d like to arrange a complimentary pension review or have an informal discussion about our current investment opportunities, please call our investment broker team on +44 (0)1273 447299 or email invest@avantiswealth.com

t: + 44 (0)1273 447299

e: invest@avantiswealth.com

w: www.avantiswealth.com

THE RICHER RETIREMENT SPECIALISTS

Your Invitation to the Seven Steps for a Richer Retirement SeminarDisappointed with the performance of your pension and other investments in recent years? Want higher growth? Want higher income? Then Seven Steps for a Richer Retirement is the event you can't afford to miss!

Rod Thomas FCA delivers a powerful presentation that uncovers an alternative to traditional stocks and shares - asset-backed investments. This is a ‘must attend’ seminar if you:

• Have existing pensions or investments that you would like to achieve returns of 6% to 12% p.a.

• Need your retirement income to be higher than currently projected

• Want more income today from existing savings or investments

• Have relied on the stock market and realise this may not be a smart decision!

Step 1 – Understand what’s gone wrong in the investment world and learn how to avoid volatility and uncertainty.

Step 2 – Discover why the right alternative and asset-backed investments are an essential part of your retirement plan, but know what to avoid.

Step 3 – Find out how to generate 6%-12% p.a. returns from your existing pensions or investments, to transform income now and retirement later.

Step 4 – Learn the difference that tax efficient investment wrappers can make and when and how to use them.

Step 5 – Apply the F.R.E.S.H. principles of investment and five other mitigation techniques to minimise risk.

Step 6 - Unleash the eighth wonder of the world – compound interest – to turbocharge the growth of your fund.

Step 7 – Correctly balance your portfolio between pension, ISA and cash investments to optimise your future.

Claim your complimentary report! Plus all attendees will receive a complimentary copy of our special report 'Property As Your Pension'

Seven Steps for a Richer Retirement Seminar

When: Thursday, 7 July 2016 from 18:30 to 20:30 (BST) Where: London - MSE Meeting Rooms, 103a Oxford Street, London, W1D 2HGT Tickets: Book at http://bit.do/7Steps DISCOUNT CODE:

RETIREMENT