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Advisers predict LTA cut will boost VCT demand

Advisers are predicting the new slashed lifetime allowance will increase demand for venture capital trusts, according to research from Albion Ventures.

Based on a survey of 105 advisers, 32 per cent say the reduction of the LTA from £1.25m to £1m from April 2016, announced in the Budget, will boost demand as savers look for other tax-efficient vehicles to use.

Over half of advisers polled expect to receive more VCT enquiries from both new and existing clients.

Advisers estimate that around 15 per cent of clients approaching retirement will breach the £1m limit, compared to the 4 per cited by Chancellor George Osborne in his Budget speech.

Albion Ventures managing partner Patrick Reeve says: “This new reduction in the LTA means advisers will increasingly be advising more of their clients to invest in a broader range of tax-efficient pension supplements, including VCTs. 

“We’ve already seen a substantial increase in investor interest in VCTs following earlier reductions in the pension lifetime allowance and enquiries following the changes to annuities and expect this additional reduction to pension lifetime allowance reduction to further boost demand.”

In addition to the LTA cut, Osborne announced that future enterprise investment schemes or VCT cash injections will be limited to firms less than 12 years old, other than where the investment will lead to “a significant change in a firm’s activity”.

The Government is also to introduce a cap of £15m on total investment received from venture capital schemes, increasing to £20m for “knowledge-intensive companies”, such as firms dealing in intellectual property. It is also proposing to up the staff limit for such businesses to 499, from the current cap of 249.

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