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NEW PARENTS NEED TO SAVE UP TO £260.55 PER MONTH TO SEND A CHILD TO UNIVERSITY IN 18 YEARS’ TIME, RPLAN.CO.UK ANALYSIS SHOWS

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NEW PARENTS NEED TO SAVE UP TO £260.55 PER MONTH TO SEND A CHILD TO UNIVERSITY IN 18 YEARS’ TIME, RPLAN.CO.UK ANALYSIS SHOWS

With the academic year now underway, analysis by Rplan.co.uk, the online investment platform, shows that new parents should be looking to invest  up to £260.55 per month to cover the cost of sending a baby to university for a three-year course in 18 years’ time.(1)

rplan.co.uk estimates that the amount needed in 2034 will be £74,307.08, assuming current fees of £9,000 and annual living expenses of £8,000 adjusted for 2% annual inflation.

The analysis, shown in Table One below, also shows the importance saving early – reaching the £57,441.79 needed in five years’ time would require much higher contributions of up to £888.29 per month.

By comparison, the average easy access ISA rate at present is just 1.11% while the best easy access savings account pays 1.55% a year.(2) Using these rates, parents would have to save £310.96 and £298.58 a month respectively to reach the £74,307.08 target by 2034.

The calculations assume an annualised return of 3% a year after charges.(3) A medium risk portfolio is designed to produce investment returns to beat inflation over the medium to longer term, ie greater than five years. A higher risk portfolio would offer the potential to achieve a higher rate of return and therefore less contributions but savers would have to be comfortable with more volatility.

Stuart Dyer, rplan.co.uk’s Chief Investment Officer, said: “The cost of studying at university has increased dramatically over the last few years and many parents or grandparents want to help contribute. Parents and grandparents that are prepared to invest at an early stage can typically take more risk. However, even with an 18-year time horizon parents may not feel comfortable with a high-risk approach to investing for their children’s education. Investments typically offer the potential for better returns than cash, though, even when a medium or lower risk approach is selected.

“Saving monthly helps to diversify risk over time – it also allows investors to take advantage of downturns in the market by providing the opportunity to buy investments at cheaper valuations over the long term, known as pound-cost averaging.  Our analysis also shows how allowing as much time as possible for investments to grow is key: shortening the time to invest can have a major impact on just how much needs to be saved each month.”

Table One: University fee targets and related contributions(1)

  18 years (2034) Nine years (2025) Five years (2021)
  Target Monthly contributions Target Monthly contributions Target Monthly contributions
Upper estimate £74,307.08 £260.55 £62,176.84 £502.49 £57,441.79 £888.29
Lower estimate £43,710.05 £153.27 £36,574.61 £295.58 £33,789.29 £522.53

Investors can access the University Plan facility on the rplan.co.uk website to estimate how much they will need per child over a given time frame and begin saving using a pre-selected portfolio tool that matches investments with their appetite for risk. The platform provides access to well over 3,112 funds for retail investors.

For further information about the online investment platform rplan.co.uk including the tools it offers for choosing individual funds and its four pre-selected portfolios, visit rplan.co.uk.co.uk.

Investing

Are clients truly getting value from their BR solution?

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Are clients truly getting value from their BR solution? 1

By Matt Dickens, Senior Business Development Director at Ingenious

Financial planners and wealth managers strive to deliver on the needs of their clients by always providing the most suitable and effective advice. But as with any service, this advice should also be delivered at the best possible value for the investor. Value can be simplistically defined as the service that delivers the most benefit, balanced against the financial cost, but in the estate planning space, how do you assess what good value is?

1. Total fees and charges

Product fees are guaranteed to negatively impact returns, so it is important to minimise their impact when looking to gain the best value from the investment. Some managers report little or no fees paid by the investor to the manager, but instead charge the company or investment service itself. While this might initially be seen as better value for the investor, it is not as simple as that. Investors in unlisted BR services become a shareholder of the portfolio companies, so the reality is that any fees paid by the companies are effectively being paid by the shareholder (or investor). Therefore, both investor fees and company fees will both negatively impact the final return and must be considered together.

Analysis of what a manager is paid by the investor and by the company over a significant period will enable an adviser to conclude if the manager is offering good value, or if a disproportionate amount of fees is going to the manager at the expense of their investors.

2. Real investment returns

Another key component of assessing value is what the investment actually delivers. For BR solutions, investors’ main objective is commonly to pass on the maximum sum possible to their beneficiaries upon death. This may lead to a conclusion that delivering Inheritance Tax relief at the lowest possible cost is the primary driver of value. However, especially for clients with longer time horizons, the one-dimensional goal of avoiding a potential 40% Inheritance Tax bill can easily over-shadow the equally important goal of aiming to steadily grow the investment, preventing erosion by inflation, drawdowns and investment fees. Unlike some IHT-focused solutions, such as trusts or gifting, investors in BR services do not have to accept zero growth of their wealth from the point of investment.  Instead, investors can continue to earn returns, either taking an income stream or increasing the final sum to be passed onto their beneficiaries, precisely in line with their original objective.

While most BR managers predict their ongoing returns at a certain level, those targets are not guaranteed and historic performance varies widely.

3. The relationship between fees and risk

Given that the majority of managers in the BR space state their performance targets net of fees, to produce positive growth and achieve their target return, those managers must first earn back any fees they are taking. Let’s take the below scenario to illustrate this point.

 Are clients truly getting value from their BR solution? 2Manager 1

Annual performance target, net of fees: 3%

Annual fees: 3%

Gross performance target: 6%

 

Are clients truly getting value from their BR solution? 3Manager 2

Annual performance target, net of fees: 4%

Annual fees: 1%

Gross performance target: 5%

Initially, it might appear that Manager 2 must be taking more risk to target a higher net return of 4% than Manager 1, who is targeting 3%. However, Manager 1 has to deliver an additional 2% of gross return than Manager 2, to make up for charging higher fees. Higher fees not only impact returns and value, but they can also mean greater risk.

Market comparison

In the Tax Efficient Review’s most recent analysis of Unlisted BR Services1, they released data that ranks services in the market in terms of both investor returns and total fees. IEP Private Real Estate achieved the top rank for returns delivered, with the second lowest total fees in the market, demonstrating that it represents attractive value for investors in comparison to other services.

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Investing

Reuters Events Launch Global Investment Summit Online Edition Uniting Institutional Investors, Asset Owners & Financial Institutions

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Reuters Events – today announced the agenda for their Global Investment Summit (Dec 3rd -4th). The 2-day strategic summit has been reimagined in the era of social distancing and will be broadcast free of charge to the public.

This Summit, with a diverse range of international voices and anchored by Reuters News-led sessions, is the only place for institutional investors, asset owners and financial institutions to come to terms with the events of 2020.

Click for more information and for complimentary registration to the online edition

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Eileen Murray, Chair, Finra
  • Philip Lane, Chief Economist, European Central Bank
  • Gregory Davis, Chief Investment Officer, Vanguard
  • Hanneke Smits, CEO, BNY Mellon Investment Management
  • Pascal Blanque, Chief Investment Officer, Amundi
  • Desiree Fixler, Group Chief Sustainability Officer, DWS
  • Joe Lubin, CEO, Consensys
  • Bahren Shaari, CEO, Bank of Singapore
  • Mark Machin, CEO, Canada Pension Plan Investment Board

The agenda released by Reuters Events Investment is both ambitious and comprehensive, and will cover four key themes: Market Outlook, Asset Management Strategies, Industry Deep-Dives and the Future of Investment.

View the full agenda here

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Investing

Halliburton & Baker Hughes CEO’s join Reuters Events: Energy Transition 2020

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Reuters Events – today announced that CEO’s of two of the world’s leading energy service companies, Halliburton and Baker Hughes, will join the speaker faculties for their flagship Energy Transition Summit.

The event will explore the creation of the future energy ecosystem and offer companies, from across the asset spectrum, a definitive guide to their net-zero strategies. The alignment of the two biggest O&G global service companies, Halliburton and Baker Hughes, represents a significant step in the transition to low-carbon energy

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Alongside their CEO speaker representation, Halliburton join as Platinum sponsors of the North American edition. Baker Hughes join as gold sponsors for the European edition of the flagship energy transition program.

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Lorenzo Simonelli, Chairman & CEO, Baker Hughes
  • Jeff Miller, CEO & President, Jeff Miller
  • Tristan Grimbert, CEO, EDF Renewables
  • John Pettigrew, Chief Executive, National Grid
  • Pratima Rangarajan, CEO, OGCI Climate Investments
  • Alex Schneiter, CEO & President, Lundin Energy
  • Gretchen Watkins, President, Shell Oil Company
  • Calvin Butler Jr., CEO, Exelon Utilities
  • Francis Fannon, Assistant Secretary ERB, S. Department of State
  • David Lawler, Chairman & President, bp America
  • Andreas Schierenbeck, CEO, Uniper

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Governance & Cooperation – Does the energy transition face a ‘governance deficit’? To understand how the energy transition will develop over the next decade, it is crucial to understand the driving governing forces behind it. Will the Green Deal provide the first domino, how can we ensure progress in the shadow of Aberdeen and ensure that we translate targets into action?

Financing Energy Transition – We must address the elephant in the room; who is going to pay for it all? An understanding of where the funds are likely to come from is key to staking claim to the infrastructural projects that will redefine the modern world in the 21st century.

New Energy Infrastructure – Low-carbon energy supply and consumption will need a radical overhaul of infrastructure. As well as revamping the old, we’ll need entirely new assets and new systems of energy delivery. It’s an unprecedented opportunity with estimated spending at $70 trillion over the next decade. Knowing which technologies are ready to be scaled first is the key to understanding opportunity

Business Model Innovation – Who will provide leadership through the age of transition and how do we want our future energy system to look? Speed and timing will be crucial if you are to stay on the right side of the transition. Join us in setting business led, evidence based, targets as industry drives towards net-zero

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

At Reuters Events, we’re committed to tackling the Energy Transition head on; to shed light on the defining issue of our time and help energy companies meet a uniquely difficult challenge. That is, to be both an energy company of today, and the energy companies of tomorrow. In a period that will be defined by uncertainty we can, together, lighten the way forward.” – Owen Rolt, Head of Energy Transition, Reuters Events

Contact

Owen Rolt

Head of Energy Transition

Reuters Events

UK: +44 (0) 207 375 7596

E: [email protected]

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