Albion Ventures: VCTs to attract £475m

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IFAs believe the sector will attract over £475m this tax year, up from £435.8m during the 2013/14 tax year, according to a new study commissioned by Albion Ventures.

Nearly one in five (18%) people investing in a Venture Capital Trust this tax year will be doing so for the first time.

This is an increase on the previous tax year when an estimated 16% of investors were newcomers.

The survey shows that more than a third (34%) of advisers predict increased levels of interest among their clients in VCTs this tax year, a marginal increase on last year’s figure of 31%. Just 3% forecast a fall in support.

According to the research, the most popular reason why clients are most likely to invest in VCTs is because they have maximised their ISA and pension contributions; accessing tax-free dividends and the reduced limit of pension contributions are the second and third most popular reasons for investing in a VCT respectively.

Nearly a third (28%) of advisers believe that VCTs are growing in popularity because IFAs have become more familiar with the sector post-RDR.  This is nearly three times higher than last year’s score of 10%.

The majority (57%) of advisers think that VCTs are sufficiently attractive in their current form.  However, over a third (36%) believes that the popularity of VCTs would increase further if the annual investment limit was increased from £200,000 to £500,000.

Patrick Reeve, Managing Partner of Albion Ventures said: “Advisers are clearly bullish about the prospects for VCTs this tax year, buoyed by even higher numbers of first-time investors.  What’s particularly striking is the sharp rise in VCT familiarity among advisers, which strongly suggests that the sector is becoming increasingly mainstream.

“This is reflected in our own experience as we are seeing interest from a wide range of potential investors, many of whom are looking to diversify their portfolio and access a tax-free dividend stream.”

The research follows the launch of Albion VCTs Prospectus Top Up Offers 2014/2015, which are seeking to raise £25.5m across six venture capital trusts.  The Offers are targeting a monthly tax-free income of around 6% (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 scheme (DRIS), under which dividends are reinvested in the form of new shares in the Albion VCTs.


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