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Can whisky be good for your pension portfolio?

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Can whisky be good for your pension portfolio?

August 8, 2022

Whisky has always been seen as a desirable collectable, but is it possible that this amber nectar could also be a wise investment choice for your pension portfolio?

In this blog post, we will explore the potential benefits of investing in whisky and discuss some of the key factors you need to consider if you are thinking about adding this asset class to your retirement savings plan.

The state of whisky secondary market

One of the key factors to consider when thinking about investing in whisky is the state of the secondary market. The secondary market is where investors buy and sell bottles of whisky that have already been released by the distilleries. This is in contrast to the primary market, which is where investors buy bottles of whisky directly from the distillery before they are released. Currently, the secondary market for fine and rare whisky is booming. This is due to a combination of factors, including the global popularity of whisky, the increasing number of collectors, and the fact that there are a limited number of bottles available.

The Knight Frank Wealth Report shows rare whisky as having increased in value by a colossal 586% over the course of a decade, making it the best-performing asset on the report and displacing the traditional commodities market leader, vintage cars. Whisky also outperformed art, fine wine, and jewellery over the same period.

Despite outperforming these asset classes, whisky also has a low barrier for entry. Casks of whisky can be bought for as little as a few thousand pounds, and there are a number of online brokers that will facilitate the purchase and sale of casks. This is a relative bargain when compared to other assets such as art and vintage cars. It is also worth noting that the price of whisky has been relatively stable over the past few years, meaning it could be a good option for investors looking for stability in their portfolios.

Whisky could also offer diversification benefits to investors. For example, while the prices of art and vintage cars are often driven by economic conditions in China, the whisky market is less dependent on any one region.

The benefits of investing in cask whisky

Unlike a lot of other commodities investments, whisky has two investment streams, cask and bottle. Cask whisky is whisky that has been distilled and put into a barrel to age, while bottle whisky is cask whisky that has been bottled.

Cask whisky offers a number of benefits as an investment. Firstly, there are no storage or insurance costs for scotch whisky, as, by law, it must remain in an HMRC secured warehouse. Secondly, whisky casks are classed as a “wasting asset” by HMRC and are therefore not subject to capital gains tax.

Thirdly, and perhaps most importantly, investing in casks of whisky provides investors with the opportunity to secure a high return on their investment as they can sell their cask for more than they paid for it once it has matured.

Bottled whisky does not offer these same benefits and is therefore generally seen as a less attractive investment. So, if you’re thinking of investing in whisky as part of your pension portfolio, it’s best to do so by buying casks of the spirit as they gather more value over time.

Of course, as with any investment, there are risks involved, and you should always seek professional financial advice before making any decisions.

But if you’re looking for an alternative way to invest your pension money, whisky could be the way to go.