Retirement Planning for Farmers

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What happens if you’re an older farmer of retirement age with a farm and land but without family to take over, or the liquid means to transition into retirement?

While we continue to be contacted by farmers interested in securing funding for their diversification projects, we’re also hearing from older farmers who are past retirement age but still farming on their own farm.  Many don’t want to come out of the farm quite yet, but the reality of reductions in the levels of Basic Payment Scheme (BPS) is starting to take effect.  Cuts in the levels will impact directly on the bottom line, especially on a holding not actively generating alternative streams of income.  The possibility of linking retirement with a draw-down of the remaining six years of BPS in a one-off lump sum is still not confirmed and any tax implications remain unknown but it appears to be holding back many families from deciding their future direction.

A case study example is a farm that has not been generating good profit, the overdraft has become uncomfortable and there isn’t the cash to buy somewhere else to live if they do come out of the farm.  A cottage comes up for sale in the village and having lived and farmed locally their whole life they don’t want to miss the opportunity of securing a local home for their retirement.  The problem is they don’t have any cash, though they are sitting on an asset of £2.5m consisting of unencumbered farmhouse and land.

With this level of security, a FOLK2FOLK loan could refinance their bank overdraft, alleviating that pressure, as well as finance the purchase of the village property as a buy to let with the rent used to service the loan.  Within our loan time-frame of maximum five years, they could stay where they are on the farm and wait to see what happens with the Basic Payment Scheme and whether a windfall materialises.  When they decide to sell their farm, the sale income could pay off the loan and they could relocate into the village property.  With the funds left over they could go on to become a FOLK2FOLK investor which would provide them with a monthly income of typically 6.5% p.a. to supplement their retirement.

FOLK2FOLK does not offer financial planning advice, but if you are interested to know more about borrowing or investing via FOLK2FOLK, please Talk To Us.

 

Your capital at risk and not covered by the FSCS. Read about the risks here.

How Your Farming Assets Can Fund Your Future 

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Farming faces a period of dramatic change. Currently there seem to be as many conversations about using land for carbon sequestration as there are regarding food production.  Will Vertical Farming become mainstream and the food to feed people in London be grown hydroponically in the disused areas under the city?  Certainly, any form of future government support will be different and more demanding, and the structure of farming will change.  But with all the discussion about the new, we must also consider the old. What are the options for farmers contemplating retirement? How do they engineer a dignified exit when they have given their lives to farming and all their wealth is locked up in land?

Picture this:

George and Mary have been married for over fifty-five years.  They started their life in the two up, two down cottage on the farm, moving into the farmhouse when George’s father died and Mary cared for George’s mother.

As an ambitious 30-year old farmer, George was one of the first to install an abreast parlour and the first dairy farm in his area to paddock graze and start using continental bulls to improve his calf income.  The farm increased in size when George purchased land from a retiring neighbour.  Mary admits that living with George can be a bit of a challenge but accepts that his stubbornness has helped them get through some tough times during their farming life. Their two boys enjoyed a happy childhood on the farm, but neither were prepared to follow agriculture as a career, and now both are married with families of their own with no intention of returning home.

On 3 June 2009, George’s milk buyer Dairy Farmers of Britain went into receivership.  Unable to find an alternative buyer for a relatively small amount of milk, the cows had to be sold.  Without that monthly milk income, the cash flow dried up and an overdraft slowly built up.  As the years ticked by, what work George could do in a day in his thirties now took longer and longer.  Mary on the other hand really would like to retire, downsize and spend quality time with George while they are still able to be active.

George and Mary are not unique in their situation and like many of their contemporaries they know what their last bit of land cost in the seventies, but not the current market value of a house, a cottage, buildings and land.  Through FOLK2FOLK the current assets of a farm can be used to prepare for retirement.  In George and Mary’s situation, the monthly letters from their bank caused unnecessary stress and upset.  Refinancing that debt against the land assets of the farm could create some space to make longer term plans.

Having lived on the edge of the same village for their entire life George and Mary are part of the community, through their church and village hall activities and Mary’s lifelong involvement with the local WI, and would like to remain in the area for their retirement.  By using their land and property assets to access a loan, FOLK2FOLK can enable them to be in a cash position to buy a local buy-to let investment property.

As everything starts to fit into place for an orderly winding up of the farm business, the loan can be repaid from the farm sale proceeds leaving George and Mary with the option of moving into their investment property in the village and the opportunity of becoming FOLK2FOLK Lenders, investing some of their surplus funds to earn an inflation-beating rate of interest each month to supplement a comfortable retirement.

How can peer to peer investing benefit farmers?

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In this blog we explore how farmers and landowners can use their surplus cash flow or land/property assets to secure their future by P2P investing.

Whether you’re looking for a retirement property or want to increase your monthly income, we discuss three ways FOLK2FOLK may be able to assist.

  1. Investing Surplus Cash

With Brexit creating uncertainty for farmers across the country, why not create a capital buffer for challenging times ahead?

By investing your surplus cash via the FOLK2FOLK peer to peer lending platform you could earn an inflation-beating interest rate of typically 6.5% p.a. paid monthly, while your capital is secured against land or property. Investments start from £20,000.

  1. Planning for Retirement

Do you have land or property you could use as security to access finance? Why not use this finance to aid your retirement preparations by:

  • purchasing a retirement property whilst the farm continues to earn you income.
  • consolidating and refinancing any existing debt.

Once you’re ready to retire, you can sell the farming assets, repay your loan and become a FOLK2FOLK Lender to earn monthly interest to supplement your retirement income.

  1. Succession Planning

This requires a delicate balance between ensuring the older generation have cash to retire without taking too much and thus starving the business of much needed working capital.

One solution is to invest capital via the FOLK2FOLK platform to generate a monthly income which may supplement the older generation’s retirement without reducing the capital holding of the farming business.

If you’re interested in finding out more about how you can start investing via the FOLK2FOLK platform give us a call on 0333 455 1902 or visit www.folk2folk.com/lend.

Capital at risk. No FSCS.

What’s the secret behind keeping Britain’s farms profitable?

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More and more farmers are finding it hard to make a living via traditional farming. This is a result of factors including decreasing food and drink prices, increasing energy costs and the undeniable uncertainty of Brexit, and because of this, farmers are seeking to diversify their revenue streams.

There are many different routes farmers can take when it comes to diversifying: setting up a glamping or camping site, farm retail, wedding/event venues, renewable energy and tourism, and many farms open their doors to the public providing a fun day out for the family or an education visit from local schools.

The need for farmers to diversify has never felt greater. Many farmers and landowners can use their land to diversify their business while keeping their love of farming at the heart. Dartington Dairy in Devon, used their FOLK2FOLK loan to diversify their cow dairy into a goat dairy, venturing into retail and ice-cream production. Now they sell award-winning goats’ milk, kefir and ice-cream to local retailers across the country, employing six local people.

Glamping has become an increasingly popular diversification. Our customers in North Yorkshire rear Aberdeen Angus Cattle, although successful, it wasn’t bringing in enough income. Their idyllic Yorkshire location provided the opportunity to diversify into glamping where they now a run a luxury 5* glamping experience, The Private Hill, which opened its doors earlier this year.

If you’re thinking of ways to diversify your current farming business, come along to the Farm Business Innovation Show on 6th & 7th November at NEC, Birmingham where you can find free inspiration and advice on how to kick start your diversification journey. You’ll find FOLK2FOLK on stand FR750 where we’re always happy to discuss how you could fund your diversification plans. To book in a meeting with us email enquiries@folk2folk.com.

You’ll also be able to hear from our Head of Farming and Rural Engagement, Ian Bell, who’ll be showcasing some of the different ways our customers have diversified. Ian will be speaking in Keynote Theatre 1 on Wednesday 6th November at 11am.

If you’re itching to discuss your ideas now, give us a call on 0333 455 1902 or find out more about our peer to peer loans.

Farmers weathering the storm

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Like the weather, politics are outside the control of farmers, so how can farmers hedge their bets in the current climate?

Having been a farmer, I feel comfortable admitting that we’re renowned for moaning about the weather (always), prices (often) and regulation (every time a form needs completing)!

The weather app on a farmers’ phone is used daily and hourly.  It has been a frustrating early August with rain hampering the harvest but since the hotter, dry weather has come in the combine harvesters are out in full force.  In fairness the weather has generally been kind to farmers and growers so far this year.  It has been a tremendous grass growing season and as a result we will produce more milk this year than any other in the last 30 years.  For a variety of factors, including the weather, our wheat crop is estimated to be 1 million tonnes higher than 2018.

In some places the weather has not been so kind and we should spare a thought for the farmers in the Yorkshire Dales; one man lost hundreds of bales of fodder and had 200 North Country Mule Gimmer lambs washed away.

We can’t control the weather or the actions of our legislators, but we can mitigate some of the circumstances.

For example, have you noticed how quickly the harvest has progressed since the onset of the better weather?  Investment in machinery and infrastructure reduces the risk to a farming business.  Greater combine capacity means a quicker harvest, increasing storage capacity reduces the risks of selling on a buyer’s market.  Better drying and cleaning facilities can increase sale values.

And when it comes to the ongoing uncertainty of Brexit, an increasing number of Farmers are hedging their bets through diversification.

At FOLK2FOLK we understand farming and allow you to use your existing assets to grow, develop or diversify your business. Why not talk to us about your funding options.

Ian Bell is FOLK2FOLK’s Head of Farming & Rural Engagement

Should we leave it to Farmers to be the curators of our Countryside?

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As we, and thousands of visitors, enjoy our beautiful countryside this autumn Claire Thayers asks us to think of the farmers who work and maintain it while considering what we can all do to help.

With winter coming there is nothing nicer than a walk in the country, enjoying the beautiful views and changing colours whatever the weather and then the delight of a hearty, warming stew in the local pub next to a roaring log firetingly fingers warming on a mulled glass of local cider….just the perfect weekend in my opinion! We love it and so do tourists… no wonder so many visitors flock to see us all year round! We’re  so lucky to live in this beautiful country, but do we just take it all for granted?

The real question is: if  we value the visitor economy shouldn’t we stop and think about the important caretaking role and contribution our farmers make to the alluring ‘countryside experience’? They manage our countryside, they rear and grow our diverse and delicious local produce, essential for us and a lure to those who visit; spending money in our market towns and villages,  the local B&B and  village pub – all small businesses at the heart of our communities who employ local people.

Sitting by that pub fire, it’s easy to forget that every day, 365 days a year, the cattle, sheep, pigs and chickens all need to be fed whatever the weather, the work that our arable farmers put into harvesting every year: the vegetables and fruit that have to be dug and picked. The work that goes into laying our hedges, managing our woodland, taking care of our wildlife, and ultimately taking care of our countryside for future generations.

It’s what makes our country so beautiful and makes us all proud!

With an uncertain future, should we just sit back and expect our farmers to continue to do what they have always done? Or can we help them to diversify to create truly sustainable businesses? To create employment for our youngsters, to keep our children in the local schools, keep the local pub open and the high streets vibrant.

We can all help! Whether that’s ‘buying local’ and contributing to your local economy or ‘investing local’ through  FOLK2FOLK to provide farm and rural businesses with the finance they require to grow, develop or diversify while you earn a great 6.5% p.a interest rate!

So, this weekend as you sit by that fire in your local pub, check out our website on your smartphone and find out more about The Local Lending Movement. You CAN make a difference!

Capital at risk. No FSCS.

 

by Claire Thayers, FOLK2FOLK Corporate & Community Engagement Manager

What is the future of our country’s food production?

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Ian Bell OBE reflects on the future of our country’s self-sufficiency.

The Second Reading of the Agriculture Bill in the Lower House poses more questions than answers but it confirms the Secretary of State’s direction of travel.  Since Michael Gove’s speech at the Oxford Farming Conference in January, his consultation ‘Health and Harmony’ and now the Agriculture Bill, one certainty is that any farm support is going to focus on public goods and I find it incredible that ‘food’ is not considered to be a public good.

For the first time in forty-five years the overall amount of money dedicated for farm support will be decided by HM Treasury,not the European Commission, through the Common Agricultural Policy.  Whatever your views about our European partners, the vociferous and sometime rebellious nature of the French and German farmers have helped the UK farmer reach a more advantageous deal.  Now we are on our own arguing around the cabinet table with Health, Education, Defence and other departments.  Although the white paper suggests that the Basic Payment Scheme will have a seven-year taper, it is unprecedented for a government to commit funding beyond the length of a Parliament and will be subject to spending reviews.  The prospect of drawing down seven years of payments at the outset could be quite appealing.

Attending a seminar hosted by the Dutch Ambassador to the UK and Promar International we debated what was a ‘public good’.  We covered water, carbon, biodiversity, energy, leisure, obesity, education but what wasn’t discussed was the one thing that everyone in the country should be concerned about – food!

I do have some sympathy with one aspect of  the Secretary of State’s strategy and that is  we must look after our soils.  The advent of Oilseed Rape in the seventies gave us a break crop that was profitable.  On many heavy clay soils we have been growing wheat and oilseed rape back-to-back and in doing so we now have uncontrollable levels of blackgrass. The under-drainage schemes we put in with funding from the EU Farm and Horticultural Scheme are breaking down and organic matter levels are abysmal.  Whilst I agree we must embrace science, we should also not forget history and remember why Viscount Townshend invented the ‘Norfolk 4-Course Rotation’ in the 18th Century.

The tragedy of the Foot and Mouth Epidemic in 2001 led to the demise of the MAFF – the Ministry of Agriculture, Fisheries and Food, and the dawning of DEFRA – the Ministry of Environment, Food and Rural Affairs.  In the Dutch elections last November, the new coalition government re-instated a dedicated Ministry of Agriculture with its own Minister.  Should we be looking for a similar change here?  Can DEFRA, as a department, deal fairly with the conflicts of delivering public goods and producing food or is everyone content to allow our level of self-sufficiency in food to fall to 50% or even lower?

I’d be interested to hear your views.  You can call us or email me – I’d love to tell you about the livestock and arable farmers we’re helping to grow, develop and diversify as they deal with some of these issues.

 

    by Ian Bell OBE, Head of Farm & Rural Engagement

A dog is a man’s best friend, but a dairy herd is a man’s livelihood

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Ian Bell, FOLK2FOLK’s Head of Farming & Rural Engagement, considers the coming winter

“Otto is missing!”  We arrived home after less than twenty-hours away to find our dog-sitter had ‘mislaid’ my wife’s springer spaniel.  Three hours of panic ensued until a red-faced lady appeared at the front door with said canine on a lead, explaining she had not realised Otto had joined her walk!  An hour later I am in trouble, again, for not charging the battery on the electric fencer that keeps our five chickens safe from Mr Renard, who sits in the field every morning licking his chops.  Living in a household with horses, dogs and chickens I am in no doubt whatsoever where I come in the hierarchy.

Man’s strong relationship with domesticated animals reaches back to biblical times and, like me, you will no doubt know people who look after their animals better than themselves.  As we see the close of our glorious summer I ask you to give a thought for our livestock farmers.  The intense heat has parched the ground, regrowth for further cuts of silage is insignificant and we are already eating next winter’s feed stocks.  I was always told that you should still have half of your winter supplies of hay, silage and straw left at the end of February – not October!

For people of my age comparisons with 1976 will resonate.

For people of my age comparisons with 1976 will resonate.  In June of that year I moved to a farm in Lincolnshire to gain experience of growing peas, sugar beet, potatoes and swedes, arriving mid-month to get a grasp of the setup before we started pea vining.  Within four hours I was running the night-shift of four Mather and Platt pea viners, we had finished the cereal harvest by the end of July and ran out of water to irrigate potatoes.  Not dissimilar to 2018.

There is however one fundamental difference over forty-two years.  In 1976 we had ‘mixed’ farming where any single farm would have a mixture of arable and livestock enterprises.  They complimented each other; the cereals would provide feed and straw for livestock, manure from the livestock fertilized the potato ground, feeding the cattle in the winter used the surplus labour from the tractor driver, and so on.

Forty-two years of constant pressure on farm-gate prices by supermarkets and processors has forced specialization and intensification.  At the turn of the last century two dairy farmers ceased milk production daily, but the cows did not disappear.  They migrated to larger units and we started to see the 500, 800 or even 1000 plus herd, constantly attempting to gain the benefits of scale.  With straw at £200 per acre and standing maize crops up to £1,000 an acre the pressures are real; and getting through the winter of 2018-2019 is going to be an extreme challenge.

Ian Bell OBE

Farmers are good conservationists

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Habitat and wildlife decline are often blamed on farmers, but Ian Bell fights their corner.

It is a familiar routine on a Sunday evening: I shout at the screen during Countryfile, no one can speak as my spouse watches the Antiques Roadshow and then collectively we analyse Captain Poldark’s riding skills!  Nevertheless, I am very proud of Countryfile.  Having served on the BBC Rural Affairs Advisory Committee during the period it went from a half-hour Sunday afternoon program to an hour and then the move to prime time on Sunday evening; it was a huge achievement.

I particularly like ‘Adam’s Farm’ when Adam Henson gives us a snapshot of activity on his farm.  I will always applaud Adam for bringing the financial and emotional consequences of a breakdown in Bovine Tb to the attention of the public.  Every week, the program highlights some terrific conservation work be it habitat recreation or working to protect various species of birds and animals; and so, to my rant: there is often an undertone that these problems arise because of farmers!

Farmers are good conservationists.  Their farm is their pride and joy and they see themselves as custodians of the countryside.  Our beautiful rural landscapes have developed over centuries through the effects of practical farming, sport and the inclinations of wealthy land-owning families.  My first employment was on a large estate; as you stood on the balcony of the Hall which over looked the park, the positioning of the trees represented Wellington’s troop placings at Waterloo.  Contrary to popular belief, farmers do not rush out with the sprayer to obliterate wildlife at any opportunity; it costs money.  Spraying is an insurance policy to ensure as good a crop as possible not a speculative operation.  Ladybirds will always be a more cost-effective way of controlling an aphid infestation than any mechanical and chemical method.

Above all, for farmers to continue caring for the countryside they must make a profit.  Conservation costs, in labour and materials, it cannot be funded from an unsustainable business.  Farmers and land-owners contentedly plant an oak tree in the knowledge that they will never see it develop beyond a strong sapling, but in the hope that future generations will enjoy the aesthetics of a mighty oak and that, at some point, it will produce a financial return.

 

Ian Bell

by Ian Bell OBE, Head of Farm & Rural Engagement

Nick’s Story

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Originally I was a farmer, but after Foot and Mouth affected us we had to diversify and FOLK2FOLK have enabled me to do this.

I have borrowed money through FOLK2FOLK since they began and I was one of their first Borrowers. I have used the money to make improvements to my land, buy a digger and renovate a large barn which now houses a business providing accommodation for autistic adults. There are fifty full-time members of staff, ten of whom stay overnight. Social Services love our barn and we are now planning on working with them to do up another barn for adults with higher needs who need a safe environment.

How FOLK2FOLK helped me

I like the fact that FOLK2FOLK, I get quick access to the funds. They know me now so I get a quick decision. I have a good relationship with the staff who are all very professional. They understand what I am trying to do and are very supportive. I would definitely recommend FOLK2FOLK as Borrowers gain access to money quickly and Lenders are happy as they get a great rate of interest.