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CONCLUSIONS
VCTs are a well-established asset class
with a solid track record of growth and
income that play an important role in
supporting the UK’s vibrant SME sector,
which is crucial for growth and job
creation. They also have attractive tax
reliefs for investors - reliefs that are
increasingly important as pension limits
are lowered. Finally, they are a source
of tax-free income, which is a unique
attraction of VCTs.
However, the regulator and Financial
Ombudsman Service (FOS) certainly
considers VCTs to be higher risk
investments than many mainstream
stock market based funds. Charges
are higher, there is less liquidity, and
the rules governing the sector are
frequently changed. Investors need
to accept an additional level of risk to
access the returns and tax reliefs on
offer.
There are many different VCT
investment options out there with
some very attractive opportunities,
but investors and advisers have to pay
attention to the details if they are to
navigate the sector successfully.
“Following the heyday for VCT fundraising in the early 2000’s,
performance was pretty variable and many clients were left nursing
significant capital losses. The sector was still relatively immature
during this period. But today advisers are able to discuss, with
suitable clients, the potential of investing in individual VCTs that
have long established and successful track records. Such clients are
likely to have been affected by recently imposed restrictions on annual
pension contributions and the reduction in the Lifetime Allowance.
For some of these clients, investment in a carefully chosen VCT could
provide an attractive, alternative, tax efficient solution”
Chris Hutchinson,
Unicorn Asset Management
VCTs are well-established and
enjoy ongoing government support
VCTs support SMEs, which are a
vital part of the UK economy
The tax reliefs are attractive and
may be more in demand as pension
limits are lowered
Charges are higher than stock
market based funds
KEY POINTS
INCOME TAX
RELIEF
TAX-FREE
GROWTH
TAX-FREE
INCOME
GENERALIST
LIMITED
LIFE
SPECIALIST
AIM
QUOTED