How your pension could be the ticket to your dream vintage watch

Much like is often the case with watches, in this case being older is better. Vintage watch lovers over the age of 55 have a unique opportunity to acquire that piece they’ve long yearned over, dreamed of buying or wanted to invest in. Those of you who hold UK pensions (personal, stakeholder and some workplace) are entitled aged 55 and above to withdraw a lump sum, of up to 25% from your pension, completely tax free. It’s called the Pension Commencement Lump Sum, and unfortunately it is not something particularly well publicised, probably because it’s not of benefit to the pension funds. Sadly this means that a lot of people don’t realise they are entitled to it. Of those that do, most commonly, this tax-free lump sum is most commonly just withdrawn and placed into a bank account. With the state of the current UK banking system, this isn’t a particularly great move as undoubtedly the rate of interest accruing on your now parked 25% isn’t even in line with inflation, meaning that in 10 years, that money that you have placed safely in a bank, whilst it has grown in number, is actually worth less and would have been better left in your pension fund. Others choose to invest there lump sum in other areas, such as in stocks and shares or property. Often these can be successful moves, offering good ROI, however both come with their own complications and taxes involved in purchasing and selling. 

 This is where vintage watches present a unique opportunity. The government deems personal possessions with a ‘useful’ lifespan of less than 50 years as not being subject to capital gains tax, which covers all machinery, which rather brilliantly includes vintage and antique clocks and watches. Meaning that if you are to purchase that lovely vintage watch that you’ve always wanted, using your Pension Commencement Lump, you can wear and enjoy it, watching it rise in value over a period. All safe in the knowledge that when you do come to sell your watch, no capital gains will apply and all of the profit made on your watch, will be yours to keep. I guess the only downside is that this relies on you not falling in love so much with your watch that you never want to sell it! But fear not, there are still advantages as this also applies in handing down the watch to the next generation or a loved one. Not only can you gift to them not only something beautiful and sentimental, but you can do so safely in the knowledge the full sale price with no tax if they do sell it. Essentially handing down to your loved ones a lump of great value, without having to pay the heavy taxes that apply in simply leaving money in your will. Not to forget also that unlike leaving money in your will, you’ve parked your money in an asset which has appreciated during your ownership and will continue to appreciate. What could be better? 

In terms of appreciation, I think it’s probably helpful to take a few examples from previous sales using examples from vintage Patek Philippe and Rolex. It is important to say that one can choose to withdraw just part of their 25% tax free allowance, choosing to draw on the rest for something else later, or alternatively of course you can also use the full 25% if you choose. 

The Patek Philippe Reference 1463 is a beautiful example of vintage for us to work with. It’s a truly beautiful piece of design that looks just as good on a wrist now as it did at first conception in 1940. Nicknamed the ‘Tasti Tondi’, the Italian for ‘Round Pushers’, the 1463 is one of Patek Philippe’s most loved chronographs and it’s appeal has never wavered. Of those that were produced, most were in 18k Yellow Gold, fewer in Steel and even less in 18k Rose Gold such as these two beautiful examples. Let’s take the example of someone who could have turned 55 in October 1992 decided to use their Pension Commencement Lump to purchase a beautiful Patek Philippe reference 1463 in 18k Rose Gold. They could have bought this excellent example from Antiquorum for CHF66,700, which with the exchange in October 1992 averaging approximately GBP1.00:CHF2.2 this means they would have won the piece for approximately GBP30,000.

Naturally this could either have been purchased by using the full tax free allowance of 25% of a pension pot of £120,000, or a smaller percentage of a larger pot. Now if you were clever enough to have bought this piece aged 55 in 1992 and held onto it throughout pension age for 25 years, then this could have made for an excellent purchase and investment. As in November 2017, Philips sold this comparably beautiful rose gold reference 1463 for CHF312,500. These two pieces are perfectly compared as they are both in comparably excellent condition, with clean, very nice condition dials and enamel and very sharp cases. Both are very close in age being from 1947 and 1948 respectively, both are very close in serial number and both are in Rose Gold.  With the exchange rate from Swiss Francs to Sterling averaging approximately CHF1.31:GBP1.00, this piece sold for approximately GBP238,550 . That is a seriously impressive return on the original investment of approximetly 695%, which certainly isn’t to be sniffed at! There’s not many investments as great as that, and let’s not forget that for that entire period you’ve been able to wear and enjoy a seriously nice vintage Patek Philippe. Now I realise the 25 years in this example may seem like a long time (we will use a shorter period in the next example) but I felt it was an important one as this is a good length of time to demonstrate if you were to hold a piece over a large part of your pension age as many people do. You could choose to sell the piece aged 80 as in this example in 2017, or of course you could hold onto it, knowing that it would sell for the same or likely more now or in the future. Of course you could have become completely enamored by 1463, even the idea of parting with it being a crazy suggestion, and who could blame you, it is a seriously beautiful watch! Well the fortunate thing about this happy dilemma is that you can keep it! Doing so safely in the knowledge that unlike passing down property or money, when it does come time for you to hand down your lovely watch to a loved one, there will be no tax to pay. Amazing! But perhaps what makes this even better is your is knowing that your original investment of £30,000 has grown exponentially and you can now pass it on to your loved ones, tax free, knowing that it will only continue to appreciate; and that if they do ever do decide to sell it they will also get to do so tax free, keeping the full amount. It doesn’t get much better than that, and you got to enjoy something you always wanted the whole time!

  But 25 years is an awfully long time I hear you say, well here’s two examples across a much shorter period of time. This time we turn to vintage Rolex in the form of the beautiful Rolex ref.6241 ‘Paul Newman’ Daytona, in 18k Yellow Gold with stunning champagne and black dial, nicknamed the ‘John Player Special’. In 1972 Lotus F1 gained the sponsorship of John Player & Sons, the cigarette brand. Their cars now styled in the super sleek black and gold livery of the JPS branding became and instant icon, to such a level that this beautiful Daytona of the same colourway quickly became donned the ‘John Player Special’ Daytona. In just 2012, you could have purchased this beautiful example from Antiquorum, complete with box and papers and in superb condition for just USD92,500, approximately GBP57,450. 

Holding onto the watch for just six years could have netted you a huge return as in 2018, this lovely example, in comparably excellent condition sold for USD650,538 approximately GBP480,100. This was also a watch on it’s own, unlike the piece purchased in 2012, which with full box and papers would undeniably fetch more.

It’s not just the higher priced watches that net such returns, the same trend can be seen in the correctly purchased lower priced pieces too. Take this seriously nice 1969 Rolex 1675 GMT with exclamation dial and pointed crown guards, exceedingly rare and with box and papers. In 2010 this piece was snapped up for approximately just GBP6,700.

Fast forward to this April this year and Sotheby’s sold a 1675 with exclamation dial, ‘cornino’ crown guards (italian for horn) referring to the pointed crown guards, in lovely condition but with no box or papers, for a whopping GBP60,000. 

This wasn’t just a one off either, just a few months later in October, Sotheby’s again sold another 1675 with point crown guards and exclamation point dial for GBP64,837, again without box or papers. Having purchased the piece shown back in 2010 with your Pension Commencement Lump Sum, one could have made a massive return, just highlighting the opportunities that are out there at every price point. 

Hopefully this has provided some interesting food for thought for some of you, or provided you with some new knowledge on unlocking the potential held in your pension. Naturally we are not chartered accountants and cannot offer you personal tax advice, so we would always recommend speaking to your accountant. Of course if you have any questions on any watches or information featured here, please feel free to get in touch and one of the team will be glad to help. For those of you who would like to get involved but aren’t sure what the best piece to go for is, or for those of you on the hunt for a particular piece that has captured your attention, then we remain at hand also, and offer a sourcing service to find the perfect piece for your criteria. Perhaps your only obstacle to navigate now is convincing your better half, and whilst I am sorry that you’re on your own with that one, hopefully this can go someway to helping you on your way!