Member Article

The alternative retirement plan that works!

There is an alternative retirement plan that works and avoids the pension crisis!

Only the most hardened financial advisor would deny that there is a pensions’ crisis in the UK, caused not just by the recent banking and financial crisis in general, but by the actual on-going differences occurring between pension obligations and the resources set aside to fund them.

But there is an alternative available to the traditional long-term schemes where money has traditionally been invested in stock and equities, with the statement, “the value of pensions can go down as well as up” used almost as an excuse for those pension investments that have dropped significantly over the years.

Most people are unaware that there are alternative, viable methods of planning for retirement that have been available to UK residents for decades – it’s just that they have been seldom used! While not new, introduced by the French government back in the 70’s, it can offer a guaranteed and index linked income.

Called “Leaseback”, it is linked to property investment in in France. And why France?

Graham Lavender, a former FSA-regulated senior advisor for 30 years, and now an independent as a result of his extensive work in Europe, has founded Pommier Property Investments Ltd with the sole aim of helping people secure specialist investment opportunities with superior returns and minimal risk, but without the need to invest a lot of time and effort.

It was borne out of his frustration that most investors were being offered the same, tired range of products, all regulated by the FSA, wrapped in return-diluting fees. These were more often than not equity based, complete with the infamous and almost iconic warning, tantamount to a get-out clause for poor performance – “your investments can go up as well as down”.

France is acknowledged as the biggest tourist destination in the world, welcoming over 80 million visitors last year. The French government introduced a scheme in the 1970’s called ‘leaseback’, which encouraged approved developers to build quality properties for the tourism industry. The properties were then - and are now - sold to private individuals who lease them back to a management company on a long-term, guaranteed and index-linked income.

People in France and throughout Europe have been using these lease back scheme (now embedded in the French pension psyche for over 40 years) as an alternative to traditional pension plans. They have several key advantages where they differ substantially over traditional market-invested pensions:

• Unlike a pension they start off with a value that increases over time - Leaseback can be owned in both husband’s and wife’s - if one was to sadly pass away, then the income and continue seamlessly for the surviving person, even passing on once more to the deceased’s children.
• Rental income is index linked from day one, which means that income actually rises in contrast to traditional pensions
• Rental income/retirement income is not based on the underlying property value. If the property price falls just before retirement it would not affect income as the is no correlation between the two
• With a leaseback there are potentially two investment growth areas - the value of the property and the growth in rental income. With a traditional pension, there is only potential growth for the value of the initial investment
• Over the long term leaseback is cheaper than investing in Pensions. With a Pension, a fixed amount is paid each month until retirement; with a leaseback capital is being repaid back, reducing each year as rents increase
• It is possible to sell and take all the money form leaseback at any time, and after 30 years, all the proceeds can be taken without the need to pay Capital Gains tax (CGT) in France - traditional UK pensions are restricted to 25% of the fund after the age of 55
• There are no low Annuity rates restricting the value of the leaseback return

A popular question asked is why financial advisers are not offering this type of investment?

The simple and main reason is that the majority of UK financial advisers are not authorised under the UK’s FSA to give this type of advice, because of its classification as non-regulated investments.

Now to the novice, this may sound as being of high risk, but why it receives this classification is that it is an investment outside of UK jurisdiction which means the FSA cannot regulate. It does, however, fall within European law, having been introduced by the French government and covered by EEC ruling.

Naturally, there are bound to be questions about the security of any deposit, or what might be the outcome should the developer go out of business.

The answer here is to seek qualified advice and ensure the investment is made only in large development companies with a good track record of managing many properties and that the investments are in prime locations - near well-established, popular or growing resorts, near beaches, ski lifts and attractions popular to domestic and international tourist alike.

Unlike experiences the wary may have read about or heard of in countries like Spain and Portugal, all deposits for these investments are held by a French Notary who is independent from the developer. They are charged by law to ensure that the developer does not fail in their requirements and duty of care to the contract before any funds are released to them. Should the developer fall under any risk that might compromise or jeopardise completion of the contract, or even worse case scenario goes out of business before completion, then through the secure bank bond required, the bank will take over and complete the project .

Pommier are running a series of free seminars around the country to outline fully “The alternative retirement and the way forward’; to find out where your nearest seminar is, please email graham@pommierinvestments.co.uk or see www.pommierinvestments.co.uk for more information.

As Graham Lavender says: “If you pay into a pension scheme, it is not unreasonable to expect to be able to take an income from it when you retire. Some critics of the UK pension system would not be too unfair in their observation that increasingly, this does not appear to be the case.

“Those who retire, only to find their pension would have made a better return had they simply just stuffed their mattress with any spare notes and coins each month, rather than pay into a formal pension scheme that has produced a nil return, would have been far better off had this opportunity been available to them when they started paying into their pension scheme all those years ago!

“It is they who would have proverbially been ‘laughing all the way to the bank’”

ADDITIONAL NOTES

• According to Rob Cooper from the influential “thisismoney.co.uk” website, “Millions of people could see the value of their pensions slashed by up to 20 per cent because of new EU rules” and “Annuities, which set retirement income for life, have already fallen to historic lows because of the impact of quantitative easing.”
• Average deposit interest rates fell from 14.2% in 1990 to 2.75% in 2011 while inflation over the same period has been in excess of 3% each year
• The cost of £1 of goods in 1960 is currently £18.34 at 2012 prices
• The basic state pension is currently £107.45 per week, yet the Joseph Rowntree Foundation says that excluding rent, a single person needs £193 to live

This was posted in Bdaily's Members' News section by Ed Moss .