Alternatives key to beating savings caps for wealthy pension savers

Top-end pension savers must look to alternative investments to avoid significant taxes from the new lifetime and annual allowance caps next year, according to Kuber Ventures, the first multi-manager platform for portfolios of Enterprise Investment Schemes (EIS).

From April 2014, pensions savings exceeding a new, lower lifetime allowance cap of £1.25m (down from £1.5m) face a tax of up to 55 per cent, while those exceeding the annual £40,000 limit (down from £50,000) will be subject to income tax at 40 or 45 per cent.

Kuber managing partner John Williams said: “The government's continued tinkering with pension regulations is unfortunately beginning to undermine confidence in traditional pension planning and those people who work diligently to save must now take a much more holistic approach to putting money aside for later life.”

“EIS are one of the most tax efficient solutions for people facing this problem.”

The schemes were introduced by the government to help small businesses to raise finance, offering a range of tax reliefs to investors who subscribe for shares in qualifying companies. Income tax relief is available at 30 per cent on the amount invested, up to a maximum of £1m and they also allow for Capital Gains Tax (CGT) deferral, loss relief and inheritance tax exemption.

Williams, however, admitted that the tax incentives are designed to compensate for higher investment risk.

He said: “To control risk when investing in EIS it is important to build a diversified portfolio across different managers, sectors and investment strategies.”

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