Wealth Club has conducted a survey of high net worth investors and found that 70 per cent of respondents said they plan to invest in Venture Capital Trusts (VCTs), Enterprise Investment Schemes (EIS) or Seed Enterprise Investment Schemes (SEIS) this year.
The firm writes that this is in direct response to their curtailed pension contribution limits. “As a reminder those earning over GBP150,000 now have their pensions contribution limited to as little as GBP10,000 per tax year.”
Ben Yearsley, Investment Director, Wealth Club says: “Although the new pension rules were introduced over six months ago, many investors are still in the dark as to the new limitations. However those that are aware are already considering their options for long term tax efficient investing. VCTs and EIS will be the major beneficiaries as 70 per cent of respondents to Wealth Club’s recent survey said they would look to invest in these investments.”
Key findings from the survey include the fact that 70 per cent of respondents will look to invest in VCTs, EIS, or SEIS; 38 per cent haven’t invested before in VCTs, EIS or SEIS; 49 per cent of high earners won’t make further pension contributions; 63 per cent of those not making further pension contributions will make VCT, EIS or SEIS investments instead.
The firm writes that it is interesting that nearly half of high earners who invested in pensions in the past will not make any pension contributions in future. “Two rule changes that came into effect in April 2016 affect many high earners in respect of pension savings. Firstly the tapered annual contribution allowance limiting high earners to as little as GBP10,000 per annum and secondly the reduction in the annual lifetime allowance to GBP1 million. VCTs and other tax advantageous schemes investing in small, unquoted companies are the alternative of choice for many of these individuals.
Ben Yearsley says: “A high earner could invest GBP1.3 million this tax year in VCTs, EIS and SEIS and receive an income tax rebate of GBP410,000. No wonder many high earners are considering these options when the annual pension contribution allowance could be as low as GBP10,000.”
