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New research finds IFAs expecting VCT demand to rise

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At 54 per cent, more than half 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 per cent) last year, according to new research from Albion Ventures, one of the largest independent venture capital investors in the UK. 

The firm reports that 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 raised over GBP21 million and Albion has now increased the total from GBP25.5 million to GBP36 million.
 
The majority (84 per cent) of IFAs are advising clients on the danger of breaching the reduced pension lifetime allowance limit and, of these, a third (31 per cent) are anticipating some of their clients exceeding it this tax year.
 
Advisers estimate that 11 per cent of clients will exceed the GBP1 million lifetime pension limit by retirement age. This rises to 16 per cent 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, says: “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 GBP25.5 million to GBP36 million.  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 GBP36 million across its six venture capital trusts.  The Offers are targeting a monthly tax-free income of around 6 per cent per annum, should investors choose to invest equally across all Offers, equivalent to approximately 8.5 per cent on the net cost of investment after up-front tax relief at 30 per cent.  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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