How Fine Wine Can Help Fund Your Retirement Planning
It has been nothing but bleak news for retirement planners and pension holders over the past few months and years, with the latest concerns that pensions are on the edge of a cliff as savers have been exposed to a giant bubble in investment markets.
The uncertainty that surrounds the current retirement planning market has seen a shift in emphasis from savers in recent years as people look to alternative methods to fund their retirement’s plans. Unable to rely on the traditional providers, it is no secret that SIPP’s have become increasingly popular for those looking to gain more control over their plans and their futures. There are even a greater number of people who will rely solely on rental income or equity release from their homes to fund them in later years.
So at a time when people are looking elsewhere for a reliable and secure way to save for their futures, I suggest savers and investors look to the fine wine market for that added boost to their retirement savings pot.
When planning ahead, for retirement, what are the key elements that savers need to ensure?
1. Capital Protection
When putting money aside for retirement plans, the most vital aspect is to make sure that capital sum is completely protected i.e. no downside
2. Low Volatility
Planning ahead means exactly that, savers want to know how much they have invested and accumulated at any given time and want to make plans based on solid projections and stable growth. They don’t want to be exposed to huge market swings that could wipe off a large percentage of the value of their holdings.
3. Solid Returns
The best savers can hope for in the current climate is inflation beating returns, otherwise they are staring at negative cash returns. With the rate currently 2.7% and the long-term average of 2.8%, anything above this level should be considered the worst case scenario.
So how does wine compare to these elements and can it really provide frustrated savers and investors with a long-term solution to their retirement plans?
Using price data for the fine wine market, we can model this information to provide answers to the questions above and demonstrate how an investment in fine wine can offer an alternative for retirement planners.
The Liv-ex Fine Wine Investables Index tracks the most “investable” wines in the market around 200 wines from 24 top Bordeaux chateaux and provides reliable data back to 1988. The graph below has taken this data and analysed the Compound Annual Growth Rate (CAGR) from a 2 year hold up to a 10 year hold.
The graph above illustrates the longer fine wine is held the less volatile it becomes.
10 year CAGR
When considering wine as an investment option for retirement savers – it’s worth discounting the shorter term figures and comparing the 10 year CAGR against the criteria that were earlier set out:
1. Capital Protection
Since 1988 on average the minimum CAGR fine wine has generated is 5.4%, therefore illustrating that an investment in wine has always ensured capital protection over a 10 year hold. These figures also emphasise that fine wine has a very good risk to reward ratio.
2. Low Volatility
Standard deviation of just 3.7% over the period reflects rather stable market conditions. Therefore investors and savers can feel confident that their capital will not experience any major value swings and to some degree can plan ahead based on assumed appreciation.
3. Solid Returns
Worst case scenario, fine wine has returned a clear 2.6% over the long term rate of inflation in the UK. Annualised returns of 5.4% is a clear winner over the best high rate savings accounts the banks can offer (2.5-3.75% pa) and when you consider the potential upside is a return of 18.4% pa, with the long-term 12.9% – the stats make for very attractive reading.
So what do these numbers mean in actual terms? What can savers and investors expect?
These are the types of figures which have made alternative investments, especially those focused on assets which are constrained by demand/supply imbalance and hold an inherent value (Silver, Wine, Art and Gold) so attractive to investors, savers and retirement planners.
There is no hiding from the fact that generating returns and protecting your money is becoming precarious, so there is a growing need to look elsewhere to find the safe haven that will match your investment objectives and help you plan for your future.
Consider This?
For those who have reached the ripe old age of 55 – will now be in a position where they can draw down on a quarter of the value of their pension pot. Depending on your provider and contributions over the years, this could be a significant sum of money. With the normal retirement age of 65, this provides a window of 10 years to make best use of this money and beat the non-guaranteed returns of 5% pa that you would achieve if left in the pension plan.
Depending on the value of that drawdown – a proportion of those funds being invested in fine wine now seems a compelling case.
So if you’re 55 and you haven’t reviewed your pension plan for a number of years – this might be the right time to dig those papers out and get in touch with your provider, as you will be surprised at the capital you have available.
Tom Gearing
Cult Wines Ltd
St Andrew’s House, Upper Ham Road, Richmond, TW10 5LA
Tel: +44 (0) 20 8332 9386
When contacting Cult Wines, please mention that you are a member of the Sun City 50 Plus Club.
Disclaimer
Past performance is not necessarily indicative of future performance and any references to specific stocks must be assessed by the potential investor. Investment advice is based on information taken from trade services and in-house statistics, and other sources, which Cult Wines Ltd believes to be reliable. Trading advice reflects our judgment at a specific time and there is no guarantee of results.
All material contained within this document is intellectual property of Cult Wines Ltd and should not be reproduced or copied under any circumstances without consent.
Cult Wines Ltd Registered in England, Company Registration No 6350591
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