Venture capital trust attracting new investors – Albion study

Over one in six (16%) people investing in a Venture Capital Trust this tax year will be doing so for the first time, according to a new study commissioned by Albion Ventures.

The survey shows that almost a third (31%) of advisers predict increased levels of interest among their clients in VCTs this tax year compared to just 3% who forecast a fall in support.

According to advisers, the top three reasons why their clients are backing VCTs are their ability to generate tax free dividends (20%); they have maximised their ISA contributions (20%); and the new limits on pension contributions, which will see the total amount that savers can keep in their pension reduced from £1.5m to £1.25m (16%).

A further 11% of advisers believed their clients would be investing in VCTs as a means of improving their portfolio diversification while 10% attributed rising VCT popularity to the fact that IFAs have become increasingly familiar with the sector.

The research follows the launch of Albion VCTs Top Up Offers, which are seeking to raise up to £15m across its six venture capital trusts. The offers are targeting a monthly tax-free income of 5% (should investors choose to invest equally across all Offers), equivalent to 7.1% 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 Albion VCTs.

Patrick Reeve, Managing Partner of Albion Ventures said, “VCTs are set to attract many new investors this tax year and this is underlined by our own experience as we’re seeing interest from an increasingly wide range of potential investors, from young professionals to the comfortably retired. The findings also suggest that advisers have become more familiar with VCTs, possibly as a result of RDR, and as a result feel confident recommending them to suitable clients.

“Ultimately it’s been a combination of low returns on savings products and the reduction in the pension lifetime allowance that have acted as a catalyst for VCTs, which have a proven ability to deliver a reliable income stream and act as a tax efficient retirement supplement.”

 

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