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'We're building a buy-to-let portfolio so our kids don't have to work'

·4-min read
Toby and Leah Evans photographed with daughters Arabella and Aurora at their home in Dorset. - John Lawrence
Toby and Leah Evans photographed with daughters Arabella and Aurora at their home in Dorset. - John Lawrence

Toby Evans, 34, from Poole in Dorset, is not just planning his and wife Leah’s early retirement but that of their young daughters Arabella and Aurora, too.

He is keen that when the couple retire, ideally in their 40s or early 50s, their children will be well on their way to being financially independent in their own right.

To achieve this kind of intergenerational financial freedom, the girls will go to a state school, rather than be privately educated, saving around £14,000 a year per child based on today's average fees.

Another sacrifice is the income from four buy-to-let properties. Instead, profits will be allowed to build up with the aim of buying more rentals over time. This cash, and by releasing equity from existing properties, will eventually fund two new purchases a year, the couple hope. The income will, in time, provide for Arabella and Aurora.

Mr Evans said: “The idea is our retirement plans won't involve the properties. That income can be diverted straight to our daughters to afford them, at say 25, to have financial independence as well. So we can have them with us in our early retirement.”

An independent financial adviser at Greenfield Financial Management, Mr Evans knows the value of forward planning. The couple save and invest £3,000 to £4,000 a month, around 50pc of their salaries, into pensions and Isas.

They maintain two investment pots (see full details below). The first is a rainy day fund of £40,000, around 10pc of their total portfolio, split equally between two conservatively-managed listed investment trusts, Personal Assets, and Capital Gearing Trust.

Their other savings are invested in a mixture of higher-growth actively-managed funds, and cheaper index funds that track the performance of a stock market. Even as a financial adviser, Mr Evans refuses to trust his early retirement dreams to picking individual stocks himself.

He said: “There are others with far greater research capability than myself. Stock picking is a very high risk strategy. It may work for some people, but whether it's realistically going to work in the long term is questionable.”

Isas can be drawn on at any age and are in scope of inheritance tax, so will provide income ahead of other assets in the early years. The Evanses will then fall back on well-stocked private pensions.

As a teacher Mrs Evans, 32, is a member of a generous "defined benefit" scheme. This inflation-proofed guaranteed pension will be drawn in her 50s.

Toby and Leah Evans photographed with daughters Arabella and Aurora at their home in Dorset. - John Lawrence
Toby and Leah Evans photographed with daughters Arabella and Aurora at their home in Dorset. - John Lawrence

Mr Evans uses the "salary sacrifice" scheme to boost his workplace pension. In addition to the 4pc auto-enrolment minimum employer contribution, he benefits from the saving his employer makes on National Insurance. The company adds this to his pot, although not all employers will. Mr Evans also pays in an additional £2,000 a month.

Aside from small increases to keep pace with the cost of living, all future salary increases and bonuses, are to go into their pensions. Once the annual £40,000 pension contribution allowances are used up, the couple begin to use up their £20,000 Isa allowances.

Once they have amassed £1m in savings, the couple will formally retire.

Hargreaves Lansdown, a wealth manager, recently surveyed its pension millionaire customers for their top tips. Most said starting a pension as early as possible was key, and advised increasing contributions on a regular basis, including with salary raises.

Helen Morrissey, an analyst at Hargreaves Lansdown, said: "One thing is clear – success is based on a long-term, rather than get rich quick approach."

In five years, the Evans's plan to invest more, around £5,000 to £6,000 a month, and live off an inflation-adjusted level of today's expenses.

Flexibility is built into the plan. Mrs Evans's maternity leave, for example, has reduced by £10,000 the amount they can save this year while maintaining their preferred standard of living.

Mr Evans said: “We're investing less during Leah’s maternity leave because we still want four nice holidays in foreign countries and the girls to go to quality childcare. We won't live like kings but won't need to buy the £3 wine when we want a £15 bottle. We won't be sacrificing today for tomorrow using extreme frugality.”

He is referring to the Spartan tactics used by some extreme savers. Instead Mr Evans sticks to two rules: spend less than you earn, and then invest the difference. “It’s no more complicated than that", he said.

He takes a similarly simple approach to investing. He admits those who punted on cryptocurrency have "won the speculation bet", but the tried-and-tested-method he backs is investing in global stock market funds and property.

He said: "Nothing else. Not bonds, not cash. Not fine wine, not whiskey, not antique furniture or works of art. For the everyday investor that doesn't work. Bricks and mortar, and global shares. For long-term wealth there's no other way.”

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