The government is reported to be considering reducing the lifetime allowance for tax free pension contributions and doing away with higher and additional rate tax relief in favour of a flat rate.
Should this come to pass it means better-off investors and their advisers will need to find new ways to invest which minimise tax liability.
A survey commissioned by VCT firm Albion Ventures found that 54% of advisers it questioned predict a continued rise in client demand for VCT over the next year compared to 32% who said this last year. They also found 84% said they are advising clients who are in danger of breaching their reduced pension lifetime allowance limit.
“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,” said Will Fraser-Allen, deputy managing partner at Albion Ventures.
A similar survey carried out on behalf of Wealth Club found 60% of investors who think pension limits are ‘too restrictive’ are now considering investment in VCT, EIS and SEIS to supplement their retirement savings.
“With more tax grabs on pensions expected to fill the black hole in public finances, high earners are naturally concerned about long term tax efficient retirement planning,” said Ben Yearsley, Wealth Club’s investment director. “Luckily there are some investments available, such as VCT, EIS and SEIS, that offer exciting growth opportunities in a tax efficient manner with annual allowances that far exceed the new much reduced pension allowance.”
