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The retirement investment you need to know about

by LLB Editor
20th Mar 23 10:45 am

Most investors in venture capital trusts (60%) are using them as a way to save for their retirement, according to a survey1 from the Association of Investment Companies (AIC).

The typical VCT investor has 13% of their portfolio invested in these vehicles, which invest in small, young UK companies with high growth potential.

VCT investors have a range of different attitudes to risk. Almost half (48%) of respondents to the survey consider themselves as medium-high risk investors and a further 14% say they are high-risk investors. However, 28% of VCT investors classify themselves as medium-risk and 10% cautious.

Why do investors choose VCTs?

VCTs offer attractive tax incentives, including 30% upfront income tax relief, tax-free dividends and tax-exempt capital gains. These tax breaks are important to VCT investors, with 79% saying they are the primary reason they invest in the vehicles.

However, the same percentage of respondents (79%) say the growth potential that comes from backing young companies early is another reason they invest. More than half (55%) of VCT investors cite supporting innovation as a factor and the same number (55%) invest in VCTs to support UK entrepreneurs.

There is general agreement that the current economic outlook in the UK and the possibility of a recession makes supporting smaller UK businesses more important, with more than three-quarters (76%) of respondents agreeing.

VCTs invested £650 million in small UK businesses in the 2022 calendar year, a 21% increase on the previous year, when they invested £539 million.

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