84% of IFAs are advising clients in danger of breaching their reduced pension lifetime allowance limit

More than half (54%) of IFAs expect to see levels of client demand for VCTs rising over the next year as a result of the pension limit restrictions, up from under a third (32%) last year, according to new research of 101 financial advisers in February 2016 from Albion Ventures, one of the largest independent venture capital investors in the UK.

This uplift in VCT interest following the pension changes has resulted in high levels of investor demand for VCTs currently raising money. A number of VCT offers are either closing or fast approaching their target limits ahead of the end of the tax year. Albion’s VCT Prospectus Top Up Offers have already raised over £21m and Albion has now increased the total from £25.5m to £36m.

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An overwhelming majority (84%) of IFAs are advising clients on the danger of breaching the reduced pension lifetime allowance limit and, of these, a third (31%) are anticipating some of their clients exceeding it this tax year.

Advisers estimate that 11% of clients will exceed the £1m lifetime pension limit by retirement age. This rises to 16% among clients in their 40s who are likely to be making contributions to their pensions over a further 20 years.

Will Fraser-Allen, Deputy Managing Partner at Albion Ventures, said:

These findings underline how clients are increasingly aware of the need to look beyond their pension and diversify their investments across a range of tax-efficient products in order to fund their retirement.

“It’s encouraging that the message is getting through to high earners in their forties and fifties who are increasingly attracted to VCTs both for their tax advantages but also their ability to generate exciting long term returns.

“Our current Top Up Offers are attracting high levels of interest and this has led to our decision to increase our target from £25.5m to £36m.  We’d advise investors to make their subscriptions well before the end of the tax year to avoid disappointment.

Albion’s VCTs Top Up Offers is seeking to raise up to £36 million across its six venture capital trusts.  The Offers are targeting a monthly tax-free income of around 6% p.a. (should investors choose to invest equally across all Offers), equivalent to approximately 8.5% on the net cost of investment after up-front tax relief at 30%.  Investors in the Offers also have the option to boost their capital growth by participating in the dividend reinvestment schemes (“DRIS”), under which dividends are reinvested in the form of new shares in the Albion VCTs.

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