How to invest your pension in history
Rather than plump for the traditional income-producing assets, a growing number of the over-55s are using some of their pension fund to invest in collectibles, with everything from stamps to classic cars and Star Wars memorabilia on the shopping list.
“We’ve seen much more interest in investing in collectibles since the pension freedoms were introduced,” says Keith Heddle, managing director of investments at stamp, coin and first-edition book trader Stanley Gibbons. “The retirement concept is changing: it’s a lot easier to access your pension now and people like the idea of investing in something that’s more tangible than stocks and shares.”
Collecting can also feed your passion in a way that’s just not that likely with more traditional investments. Gary Ashburn, collectibles expert at Hochanda TV, believes that most successful collectors are driven by passion rather than the potential return.
“It’s often about nostalgia, with many people collecting things that remind them of their youth,” he explains. “This is great: whether it’s a film star, a football team or a particular type of antique, if it’s something you’re passionate about, you’ll have a better understanding of what you’re buying.”
This passion means that a collection can quickly turn into a hobby. This is the case for Colin Hughes, 62, from Ferndown in Dorset (pictured below). He has always loved the quirkiness of old Citroëns and now owns an H Van and a pair of 2CVs, one for shows and the other as a run-around.
Although his interest was initially in maintaining these vehicles, it’s now led to regular social events. “Because of the Citroëns, my wife and I are members of several car clubs and will regularly get together with other owners at shows or weekends away,” Colin explains. “Every year, we go with the H Van over to France and take part in a rally. It’s brilliant fun and we get an amazing reception when we drive through the villages.”
While there’s the potential for more fun than a traditional investment, it doesn’t mean you have to forfeit a healthy return. “Supply and demand economics come into play with collectibles,” says Mr Heddle. “If you buy a rare stamp, there’s a finite supply so the value will increase in line with demand.”
New sources for demand can often emerge, too. To illustrate this, he points to the Chinese market. Banned from the bourgeois practice of collecting coins and stamps by Chairman Mao, the wealthy Chinese are now looking to invest in trophy assets with these once-forbidden items now very much up for grabs.
Just how this demand can push up returns can be seen in the prices some collectibles have achieved. Sticking with stamps, while the most valuable one in the world – a 19th-century British Guiana one cent magenta stamp – sold for $9.5 million (£6.55 million) at auction in New York in 2014, over the past decade even the top 250 traded investment-grade British stamps grew by an average of 11.78% a year.
There is potentially even more profit to be had from more unusual items. For instance, at an auction of Star Wars toys in December 2015, a 1978 Luke Skywalker action figure, which would have originally cost less than a pound to buy when first released, sold for $25,000 (£17,748).
“This was a very rare figure, as it was recalled because it was considered too dangerous for children. But even if you have one of the more common figures, they can sell for anything from a few hundred pounds upwards,” says Steve Ware, a sci-fi and film memorabilia expert and organiser of Greedy Goblin Con, an annual TV and film convention.
Trends in collectibles
But, whether you collect for love or profit, there are important features of the market that you need to consider. First, it’s governed by fashion. Among yesterday’s collectibles are Ty Beanies, Pokémon and Poole Pottery, but Mr Ware says not to despair if any of these are your bag. “Fashions change and many things will become popular again in a few years’ time,” he explains. “It can even be a good time to build your collection with some bargains.”
Just as some items can fall out of favour, there are events that can push up their price considerably.
A new film, for instance the release of Star Wars:The Force Awakens, or an anniversary, such as the centenary of the First World War, can attract new collectors.
Given this, Mr Ware recommends looking out for toys and film memorabilia from the 1980s and 1990s, tipping in particular anything connected to Ghostbusters. “They’re iconic characters and with the new film being released this year, these items are already selling for a fortune,” he says.
On a slightly more macabre note, death can also push up the value of collectibles. “Whenever a major celebrity passes on, the price of their memorabilia goes up,” says Mr Ashburn.
“There’s more interest in them, but there’s also no possibility of any more of their memorabilia being produced. It’s the good old laws of supply and demand.”
A recent example of this was the death of David Bowie, which resulted in a huge increase in interest in owning anything and everything related to him.
The rising price of collectibles
|Stanley Gibbons English Coin 200 Index||12.75% a year between 2005 and 2015|
|William III Silver Crown from 1697||125% growth (£20,00 to £45,000) in 2014|
|Stanley Gibbons GB250 Index (top 250 investment-grade GB stamps)||11.78% a year between 2004 and 2014|
|Stanley Gibbons China 200 Market Study|
|200 rare investment-grade Chinese stamps||An increase in value of more than £4 million (£358,264 in 1989 to £4,522,300 in 2014) including an increase of £787,950 between 2012 and 2014|
|Stanley Gibbons rare books index (30 first-edition 20th-centry classics)||8.8% a year between 2005 and 2015|
|First edition of George Orwell's Animal Farm||2584% growth (£190 to £5,100) between 2005 and 2015|
Source: Stanley Gibbons
Do your homework
While there’s often plenty to pick from when you’re building up a collection, some items will be worth more than others so it’s worth doing your homework. This not only helps you avoid paying over the odds for an item, but also means you can avoid the fakes. Unfortunately, as collectors show more interest in different areas, so will the scammers. Mr Ware says this is where having a passion for your collection can be invaluable. “If you’re collecting something you love, chances are you’ll know more about it and know whether it’s genuine and fairly priced,” he explains.
With more unusual items, especially where there’s an interesting back-story that boosts the value, it’s sensible to get this documented so you can prove it. “Being able to demonstrate provenance has become increasingly important,” says Mr Ashburn. “If you don’t have letters or photos to show the item is genuine, an expert can authenticate it for you. There is usually a charge for this, but the certificate they provide could significantly increase its value.”
It’s possible to get this provenance yourself with some items. For instance, if you collect autographs or like to get a celebrity to sign a book or T-shirt to boost its value, take a photo of them doing it as proof.
If you don’t fancy taking your chances or haggling over items in an antiques fair, you can always hand the decisions over to the experts. As an example, Stanley Gibbons has several investment products that allow you to invest in stamps, coins and first-edition books without needing to know your Inverted Jenny (a US stamp of a stunt print that was accidentally, but perhaps appropriately, printed upside down) from your Casino Royale (one of the titles included in Stanley Gibbons rare books index). “You can specify what you’d like us to buy for you or you can leave it up to our experts,” says Mr Heddle.
Cost of collecting
Whether you do it yourself or not, it’s also important to take into account the costs associated with owning collectibles – a fee akin to the annual management charge on a more traditional investment.
Depending on the value of your collection, you may need to take out additional insurance. Although a standard home insurance policy will cover valuables, many stipulate a maximum value, which is typically around £1,500. Your insurer may allow you to extend the cover you have in return for details of what you’d like to insure and an additional premium, but it may be better value to take out a specialist policy.
Storage costs can also come into play. Many items will need to be stored carefully to preserve their value. “Don’t let them sit in the sun or get dusty,” says Mr Ashburn. As an example, he recommends keeping autographs in a book or framing them in non-reflective glass.
Where something is particularly valuable or difficult to store – for example, wine – it may be sensible to pay for professional storage.
Sometimes these costs can be part of a broader package. For example, Stanley Gibbons will look after its investors’ items on their behalf, free of charge. “We will store and insure our investors’ items, even allowing them to come and see them if they like,” says Mr Heddle. “You can look after them yourself, but you do need to be careful about how you store and insure them.”
Selling your treasures
A further benefit of entrusting your collection to the experts is that when you come to sell, there won’t be any questions over where the item is, or even what it is. Mr Heddle says that this gives buyers the confidence that it’s genuine and can even add to the value.
If you can bear to be parted from your collectibles, you also need to factor in the cost of selling. An auction house will charge between 10% and 15% of the hammer price, usually subject to a minimum that’s payable whether the lot sells of not. On top of this you could also face a lotting fee, generally a few pounds for each item; an insurance charge; and a collection fee if it needs to be transported to the auction.
Auction sites will also charge you to sell items. For example, eBay charges 10% of the total transaction amount when an item sells. It’s also important to remember that, however you sell, you might not get the money you expect.
But, although some people collect to make money, Citroën enthusiast Colin says the financial gain isn’t what motivates him. “I’ve been offered huge amounts for my H Van,” he says. “It’s great to know it’s worth more than I paid for it, but I collect these vehicles to preserve them and for the fun they bring.”
Gary Ashburn (pictured above) is the collectibles guru on Hochanda TV. Here are his tips to get the most from collecting.
- Get sets – a complete set is always more desirable than individual items, and buyers will pay
- a premium for a ready-made collection.
- Think outside the box – if you’re collecting, look for things that might not be regarded as a collectible but will add value. For example, if you collect Bowie memorabilia, pull together some of the press coverage relating to his death as this will be valuable too.
- But keep everything in its box – keeping collectibles in their original packaging can add up to 30% to their value.
- Check its provenance – get as much information and proof to support a collectible’s authenticity as possible. If necessary, get a certificate from an expert.
- Collect something you love – you can try to predict what tomorrow’s collectibles will be and although you might end up a multi- millionaire you’ll also end up with a lot of rubbish. Collect something you love instead.
Annual management charge
If you put money in an investment or pension fund, you’ll not only pay a fee when you initially invest (see Allocation Rate) but also a fee every year based on a percentage of the money the fund manages on your behalf. Known as the AMC, the actual percentage varies according to the particular fund, but the industry average for active managed funds is 1.5%.