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VCTs: A pension alternative that boosts returns by 30pc (The Telegraph)

by Kyle Caldwell

Savers worried about landing a big tax bill on their pension savings have been urged to tax-proof their retirement pots.

The threat of tax raids on pensions looms large for hundreds of thousands of investors, who must quickly find alternative ways to save or face a shock bill.

From April, the total amount that savers can keep in a pension pot tax-free will be reduced from £1.5m to £1.25m.

Immediately, this will drag 30,000 people into paying up to 55pc tax on the excess, according to HM Revenue & Customs figures. The taxman expects this number to balloon to 360,000 as savers' pension pots grow towards the so-called lifetime allowance threshold.

Experts said someone in their forties with a £300,000 pension pot could easily hit the limit by retirement.

Alistair Hardie of Standard Life said many are sleepwalking towards a trap.

"The stark reality is the reduction in the lifetime allowance is going to affect more people than first realised," he said. "And it looks as if these people are unaware of the risk of a tax charge. Savers might be years away from retirement but if they have saved a fair amount in various pension funds they could be near the danger zone."

Many astute savers facing this fate are turning to an alterative tax-efficient investment called venture capital trusts, commonly known as VCTs. After pensions, which offer full tax relief on anything saved, VCTs are one of the best ways to shelter your investments.

 

Read the full article on The Telegraph website.