Players, pandemics and planning — Mills, Reevaldo & Elle

This instalment of the Reevaldo & Mills series has been written by the Mills & Reeve Sports Law team, in collaboration with financial planning and investment firm, Tilney.

Mills spent his day off from training looking after his new born son, Mills Junior. The whole ordeal with Tasha and the associated courtroom saga has been an unwelcome distraction – his performances on the pitch have not been up to scratch which, in turn, has been commented on by the club and fans alike. Their patience with him is running thin and, while initially frustrated that they have shown him no loyalty, even Mills has to admit that the events of the last few months have been a sobering wake up call.

The press coverage of Mills’ relationship with Tasha has been relentless. In the early hours, after checking-in on Junior, Mills’ phone pinged with an alert to an online blog - “Party Boy Footballers: Who Will Go Bust Next?”. His “party boy” image, notoriety for betting big money and lavish lifestyle were ripped apart by the author, who was a well-known football commentator and former “no nonsense” kind of footballer (not too dissimilar to Mills back in his day). The focus of the blog was that Mills was one of the most likely athletes to go bankrupt in the near future. Particularly, the collapse of Mills’ sponsorship and endorsement deals, due to COVID-19 and recent events, was used to critique his reckless “I want it all mentality”.

Mills’ initial reaction, in a fury, was to jump on Twitter and respond direct to the blog. He did, however, notice some stark statistics. The blog referenced research findings published on the Professional Footballers’ Association website which found that: (i) 52% of respondent’s to a survey reported financial difficulties after 5 years of stopping playing their respective sports; and (ii) 6% of retired (cricket, rugby and football) players have taken formal protection from bankruptcy¹. With the year that Mills has had, he did wonder if continuing with his so-called “crippling vices” (as discussed in the blog) and obsessive personality would be setting himself (or Junior) up for failure.

What will he be doing after he is no longer playing at the top level? What if COVID-19 significantly impacts Mills’ earnings over the next few years, especially in relation to sponsorship deals?

The many “lockdowns” and COVID-19 restrictions of 2020/2021 had already given Mills a lot of time to think about other aspects of his life.

After a sleepless night, and about a dozen messages to officials at the club asking for advice, the club embraced the fact that Mills appeared to be turning a corner as he was evidently concerned with his financial future. One day at training the following week, the Club organised a session with a firm of financial planners, who emphasised the importance of managing finances early on in a career.

Impressed by the presentation, Mills saw the benefit in the advice and, wanting more, he arranged a one-on-one video call with a financial adviser from the same firm.

What were the key takeaway points from Mills’ meeting?

Sportspeople need a professional financial planner to help them become financially independent; someone who understands that sportspeople:

- Need discretion: an adviser with experience in working with high-profile clients, helping them keep their private lives private.

- Lead busy lives: Mills rightly prefers to concentrate on his career.

- Potentially have a complex financial situation: a financial planner will work with Mills to help him understand his finances, including tax liabilities, bills and spending.

- Mills explained that he wanted to achieve financial independence, not only now, but in the future too. The adviser discussed a financial plan with him that considered his entire career and his financial future. They used cash flow modelling to show how Mills could achieve his goals, which answered the following questions: “how much do I need to save or invest to maintain my lifestyle?”; and “am I going to run out of money in later life?”

- They discussed the structure of his professional contracts and image rights deals to see whether the tax burden could be reduced.

- Noting that Mills’ most valuable asset is his career, the adviser looked at insuring his career against injury and illness. This insurance may be paid out as a lump sum and is likely to be tax-free².

- Explaining that professional footballers have short - but intense - careers, the adviser discussed how Mills’ financial plan could be built for Mills so that he could accumulate wealth over time and so he can become financially independent. This flexible financial plan could help Mills save and invest for retirement, working around his current earnings and his contract³. The plan will be reviewed regularly to take into account pay reviews, club transfers and bonuses received throughout his contract.

- Mills now also realises that he has a legacy to protect going forward. Protecting Mills’ wealth is an essential part of risk management for Junior and, as such, they discussed how (alongside his lawyers) this could be best achieved in the context of tax planning and preparing a Will so as to ensure that his family has a plan for the future⁴.

- Not being able to draw on a pension until age 55 (soon to be 57) poses a significant problem for Mills (as his career will finish much earlier than this!). The adviser discussed a plan so that he can have flexibility when retiring early; for example, by building up sufficient money to help re-train for a new career or set up new businesses. The adviser also mentioned that he will also help Mills understand how pensions work, so that he can build a significant tax-efficient fund that will give him an income from age 55 ⁵.**

- The financial planner looked at Mills’ tax position and will now create a plan for tax-efficient investing, making sure he doesn’t pay more tax than he needs to. There are tax reliefs available through pensions and ISAs remain a simple way to manage overall tax liability.

This article does not constitute personal advice. If you are in doubt as to the suitability of a particular course of action please contact one of our advisers.

Nigel Lister, Financial Planning Partner

Tilney Financial Planning Limited

[email protected]

0121 410 5570

www.tilney.co.uk

https://www.thepfa.com/news/2018/2/5/ppf-initial-career-transition-research-findings ↩
Please bear in mind that an insurance policy will end if you do not make payments and there will be no cash value unless a valid claim is made. ↩
The value of an investment may go down as well as up, and you may get back less than you originally invested. ↩
Prevailing tax rates and reliefs depend on your individual circumstances and are subject to change. ↩
Members of the PFA pension scheme pre-A Day (5/4/2006) have a protected pension age lower than the norm; typically age 35 or as negotiated with HMRC. If the pension was transferred to a SIPP or personal pension before A Day, the same applies. ↩