The progressive growth trust from Aberdeen Asset Management, has been targeted at investors who want to capitalise on the £7,200 a year capital gains tax (CGT) allowance and who are trying to save for future costs such as school and university fees or retirement.
It does this by investing in zero dividend preference shares. Zeros give fixed capital returns at a pre-set date so this means that investors do not have to pay income tax.
The unit trust can be included in an Isa, with no tax payable at all. If the investor has already utilised their Isa allowance then the fund can be used to increase the amount of tax-free investment. With no CGT payable on the first £7,200 of growth, anything over that amount is covered under the taper relief rules. This means that tax can fall to as low as 12 per cent for a basic rate tax payer. Married couples can combine their allowances to a total of £14,400.
Many investors are not aware of the capital gains tax allowance and so it remains underused. Although a worthy product because it highlights the CGT allowance, it is not alone in the market and offers nothing that is unique.
According to Standard & Poor's the Aberdeen master growth fund is ranked 31 out of 58 funds, based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to July 17, 2000.