Additional ways to invest for retirement
Planning ideas to help clients who are restricted in their pension planning.
Helping clients invest tax-efficiently for retirement
Clients who are constrained by how much they can put in their pension could benefit from additional ways to invest tax-efficiently for retirement.
With Venture Capital Trusts (VCTs), investors can claim certain tax reliefs, including 30% upfront income tax relief to the value of an investment. These act as an incentive to take on the risk of investing in smaller companies. Read more about the risks.
Let’s look more closely at planning ideas that could help clients who are constrained in their pension planning.
Planning ideas for clients
Exceeded lifetime allowance
Large pension contributions and compound growth can mean some clients find themselves expecting to exceed their lifetime allowance, in some cases as early as their 40s or 50s.
Clients affected by the lifetime allowance could benefit from another way to invest tax-efficiently for retirement. They may want an additional tax-free income stream and an investment they could access ahead of their pension.
High-earning National Health Service (NHS) professionals are increasingly finding themselves unable to contribute further to their generous pension schemes.
Medical professionals who are restricted in what they can pay into their pension could benefit from other ways to invest for retirement that offer upfront income tax relief.Clients affected by the lifetime allowance could benefit from another way to invest tax-efficiently for retirement. They may want an additional tax-free income stream and an investment they could access ahead of their pension.
Tapered annual allowance
Very high earners can be impacted by the tapered annual pension allowance, meaning that making incremental pension contributions is less tax efficient.
Clients constrained by the annual pension allowance can benefit from other tax-efficient investments that complement their retirement planning. They may want an additional tax-free income stream and an investment they could access ahead of their pension.
It’s common for clients to invest in a property portfolio to help fund their retirement. But some may want to use their rental income to invest for the future.
Landlords could benefit from making an investment that lets them claim tax relief against their rental income, and that targets tax-free income.
Risks to keep in mind
Capital is at risk
The value of an investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest.
Tax relief can’t be guaranteed
Tax treatment depends on individual circumstances and tax rules could change in the future. Tax reliefs depend on the VCT and portfolio companies maintaining their qualifying status.
The investment may be volatile and difficult to sell
VCT shares and the shares of AIM-listed and unquoted companies, could fall or rise in value more than other shares listed on the London Stock Exchange’s main market. They may also be harder to sell.
Got a client in mind? We can help
Speak to a member of our team to discuss tax-efficient options for clients who want to plan for retirement.
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Duration: 1hour 48mins