Advisers are encouraging clients to supplement pensions

This appears to be as a result of the changes announced in the Chancellor’s pre-budget report. 

The research, conducted among 274 intermediaries including IFAs and wealth managers, found that two-thirds (66%) think George Osborne’s decisions to cut the annual allowance on pension contributions from £50,000 to £40,000 and reduce the lifetime limit from £1.5m to £1.25m, undermine consumer confidence in pensions.

As a result of the changes, nearly half (45%) of advisers think more investors should consider Venture Capital Trusts (VCTs) as a tax efficient way to supplement pension savings.

When asked to list the key benefits of VCTs as a retirement savings vehicle, advisers selected 30% upfront tax relief, tax-free dividends and tax-free capital growth as their top three.

Patrick Reeve, Managing Partner of Albion Ventures said:

“While these cuts are aimed at higher earners, as an unintended consequence, an already low level of public confidence in pensions could be damaged further.

“What is clear from the research is that these changes have acted as a catalyst for advisers to explore other ways clients can supplement their retirement savings.  With a sizeable portion of the UK’s baby boomers retiring over the next decade, there is growing pressure to source predictable levels of attractive income and it’s no surprise that we have seen a steep rise in enquiries from advisers.

“Our VCTs appeal to investors both pre and post-retirement. with the latter often treating them as a pension supplement by accessing a strong income stream while preserving capital.  The former regard it as a long term savings plan and mostly reinvest their dividends to get a further 30% income tax relief on the value of their dividend. After retirement they can start taking the cash instead.”