In this ZEPscope feature, Zenzic Capital explores one of the most overlooked risks in Business Relief estate planning: the long-term erosion of real value by inflation; and sets out how ZEPS is structured to address it.
Preserving nominal capital is not the same as preserving real value and for Business Relief estate planning, that distinction matters more than many advisers and their clients are made aware of. A £1m estate subject to a sustained 3% annual inflation rate loses approximately £255,000 in real value over a decade. For clients in BR schemes, who may hold assets for longer than initially anticipated, that erosion is not a theoretical risk, it is a practical planning consideration.
The challenge is compounded by life expectancy. Actuarial data consistently shows that the longer a person lives, the longer they are statistically expected to continue living. A client entering a BR scheme at 80 may still hold those assets for a decade or more. During that time, inflation does not pause – and the real value of what they intend to pass on can be quietly but significantly reduced if the underlying investment strategy does not actively account for it.
ZEPS’ approach to this challenge is built on four principles. The first is a target return of 5-6% per annum, set with the aim of outpacing prevailing inflation rates, though this is a target only and is not guaranteed. The second is strategic diversification across sectors with inflation-resilient characteristics, reducing exposure to sector-specific volatility. The third is a blended loan maturity schedule designed to allow the portfolio to adapt as interest rate and inflationary conditions shift. The fourth is a deliberate focus on sectors, including student accommodation and storage where rental income has historically demonstrated real-terms growth, though past performance is not a reliable indicator of future results.
For advisers building estate planning portfolios for clients with longer time horizons, understanding how a BR service approaches inflation is as important as understanding how it approaches credit risk. Capital protection should reflect genuine investment discipline and not simply be a freeze on nominal value.
For professional advisers only. Capital is at risk. Target returns are not guaranteed. BR qualification and tax treatment depend on individual circumstances and legislation, which may change. Past performance is not a reliable indicator of future results.
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