EISA is engaged in the early stages of a research project into attitudes to EIS within the wealth management, private banking and financial planning communities.
Initial feedback suggests EIS/SEIS are considered by some respondents in terms of an allocation to smaller companies – higher risk/higher return potential investments that may have a place in an individual’s portfolio, depending on their risk profile, investment goals and time horizon.
But the most consistent finding so far pertains to the changing attitudes to EIS/ SEIS as a result of the steady erosion of pension tax relief that began in 2010-11, when the annual allowance was cut from £255,000 to £50,000.
This so-called ‘attack’ on pensions continued in the summer Budget, with the announcement that pension tax relief for individuals earning more than £150,000 a year would be tapered down to an annual allowance of just £10,000 for those earning above £210,000.
As a result of dwindling pension tax relief, high earners and wealthy individuals – and their wealth managers and advisers – are turning to alternative tax-efficient investments.
Respondents tell us that EIS and SEIS – with their combination of 30%/50% income tax relief, no CGT or IHT, loss relief and CGT deferral – are being factored into their thinking as never before.
EIS and SEIS are arguably the most tax-efficient investments currently available, on top of which their growth/return potential is higher than most listed investments.
Industry performance figures are not readily available but the EIS sector recognises how beneficial these could be and is working to provide such data in future.
In the meantime, EISA is continuing to forge closer links with the wealth management sector on behalf of its members and the wider EIS/SEIS industries.
