Reap - Real Estate Annuity Plan

Gracie100

Has anyone invested with this scheme? It can be found as myreap

It has been written up in The Guardian and Independent and its website is well presented. However, I would like more information before committing funds to it!

Thanks for any information.

mania112

"Reap is a new property-based way for you to receive a fixed income for a more financially secure future"

More financially secure than a proper Lifetime Annuity? No. Never.

Is putting all your eggs in one basket a good retirement plan? No. Never.

Are you protected in any way against losses? No. Never.

dunstonh

On its website is stays: "Private and secure". However, it is not secure. It has loss potential (of upto 100%) and no FSCS protection. A regulated investment could not use that sort of wording and get away with it. This is an unregulated investment so doesnt have to comply with industry standards.

Comparing it to savings rates could actually be a FCA breach as they require you to compare with assets with the same sort of risk level. However, again, its not regulated so doesnt have to comply with those standards.

it also gives false information about annuities (that is out-of-date). For example, it says "Unlike typical annuities, with Reap 100% of your money is returned to you". Annuities can return capital. With the pension freedoms, legislation didnt just change drawdown options. It also removed limitations on annuities.

To say it has no fees is not accurate. There may be no explicit fees but there are certainly implicit ones. Effectively, they buy a property using your money, do it up, you take some of the rental income (remember this will be based on the fact the property has been improved and whilst it is 7% of your money, the rental yield wont be 7%) and they keep the property value growth and any surplus income. The growth in property price and any surplus in rental income is the implicit fee. However, you dont own the property, you own loan stock.

Inflation risk. In 10 years, £100k will be worth around £65k in spending power. So, if you stayed in this for 2 periods, your capital will decline in real terms significantly. So, you need to take some of that income to cover inflation. Otherwise you will start eating into the capital in later years as there is no indexation and you are subject to shortfall risk. Another way of looking at it is that it may be 7% now but in 10 years time it will be around 4.5% in real terms or 2.9% in 20 years or 1.9% in 30 years. You cant ignore inflation when looking at retirement income as you are likely to live for 20-30 years.

If you have a lot of money where you can afford to put a small part aside into an illiquid investment (where you can afford not to withdraw from it) and accept that there is the possibility of no-return then it may be worth a small dabble. However, using unregulated investments with loss potential for large amounts of your worth is just silly.