Investment Planning

This content is for information and inspiration purposes only. It should not be taken as financial advice. To receive tailored, regulated financial advice into your own financial affairs and goals, please consult an independent financial adviser.

Inflation is generally understood to refer to the overall rise in prices, over time, within a given economy. If something (e.g. a dress) costs you £100 in 2019 and inflation rises by 2% twelve months later, then it would cost you £102.

In other words, the same amount of money (e.g. £100) gradually loses its “spending power” over time, with rising inflation. This is important when it comes to investing, as inflation can potentially eat away at the returns you are getting on your savings or investments.

Indeed, this quite often happens without many people realising. For instance, at the time of writing, Which? did some research to show that you would be lucky to get a bank account (unlimited-withdrawals) with a 1.5% interest rate. Yet UK inflation in June 2019 stood at 2%.

What that means is, you might commit, say, £1,000 to an account like this believing it would eventually grow to £1,015 by next year (i.e. 1.5% growth). In real terms, however, your £1,000 would be losing its spending power since inflation (2%) is 0.5% higher than your interest rate.

This isn’t to say that you shouldn’t have an instant-access savings account, with unlimited withdrawals. This can be a useful way to store emergency or short-term savings, for instance, which you might need to access quickly.

However, it does highlight the hidden eroding power of inflation on our savings and investments. In particular, if you want the money in your investment portfolio to grow over time, then you need to ensure that your investment strategy factors inflation into the picture.

After all, if you can regularly generate investment returns which beat inflation, then your money is not only going to grow on paper – but also in real terms. If inflation is 2%, for instance, and your investments grow by 8%, then your money has ‘real’ growth of an impressive 6%.

Investing to Beat Inflation

Of course, your primary goal when investing should be to beat inflation – but it’s typically an important “pillar” within your overall plan. If your main goal is to grow your wealth, then naturally, regularly beating inflation will be crucial. On the other hand, if your main goal is to preserve the wealth you have accumulated, then you will likely still want your money to at least hold its value as much as possible over time, and not be eroded by inflation.

The challenge is, it’s not possible to accurately predict what the level of future inflation is going to be. When you look back over recent UK history, there has been quite a lot of variation:

• 2% in June 2019
• 5% towards the end of 2011
• 2% at the beginning of 2008
• 2.96% in 2000
• 9.46% in 1990
• 17.99% in 1980 (largely due to a recession)
• 6.4% in 1970

It’s worth stating that the Bank of England was set up primarily to keep inflation low. So there is a strong reason to assume that we will not see inflation skyrocket to some of the figures seen above, any time soon. However, this is not guaranteed and certain events (e.g. a major change in the economy or government policy) could lead to a rise.

One of the main ways investors try to beat inflation with their investments is to incorporate some “Higher-Risk; Higher-Return” assets into their portfolio. These assets tend to pose a greater risk of generating a negative return on your original investment, but also possess the potential to generate a higher return which can beat the rate of inflation.

Investing in companies (either directly or via funds) is a good example of this approach. This is because many businesses (e.g. infrastructure and energy companies) can raise their prices in line with inflation to cover their costs. Theoretically, this can allow them to continue growing even as inflation rises.

This forms an important reason behind why even the most “defensive” or “conservative” investment portfolios (tailored to preserve wealth) often incorporate a degree of equities, rather than simply relying on fixed-interest assets such as bonds. This is because the interest you generate on a bond may not keep up with rising inflation, even though many bonds (i.e. “IOUs” issued by governments and companies) are generally seen as “lower risk” than equities.

Final Thoughts

There is no universally-agreed answer to the question of why inflation rises at different speeds over time. Yet it is generally accepted that a sound investment strategy should incorporate assets and tactics to mitigate inflation, and even attempt to beat it. It is very important to know the level of investment risk you feel comfortable with, but equally important to know as well is the level of investment return you need to meet your lifetime goals. People often overlook the risk of not reaching or having to compromise on their goals, because they avoided some level of investment risk.

If you are interested in discussing your own financial plan with us in light of the above discussion, then we’d be delighted to hear from you. Please get in touch to arrange a free, no-commitment financial consultation with a member of our team here at WMM.

Over the last 100 years, the earth has warmed by about 1˚C. It might sound insignificant, but when you consider the effect that future planetary temperature rises are likely to have, it is certainly important:

A further rise of 2˚C is predicted to result in eradication of the Arctic seas ice during summertime, leading to faster rises in temperature (since there is less ice to reflect sunlight away from the earth). Violent storms and floods are likely to increase across the world, especially near the coasts. Acidity rises in the seas, killing coral reefs and krill.

Exceeding this 2˚C rise would almost certainly be devastating, leading to rainforests eventually being wiped out, rises in sea levels as the ice in Antarctica melts, huge human displacement and widespread elimination of species groups.

To many people, this prognosis can sound highly alarming and insurmountable. Some people deny humans’ contribution to the rise in global temperatures, but we here at WMM accept the prevailing view within the scientific community that a low-carbon worldwide economy is key to addressing the situation, before catastrophic irreversible damage is caused to the environment.

Assuming you agree, what can actually be done? Normally, answers to this question point to the importance of taking personal responsibility for important areas of our lives such as food consumption, energy use (particularly those reliant on fossil fuels) and responsible waste disposal. Less often, however, do we tend to think about investing.

How investing affects climate change

Yet the subject of investing is incredibly important. Consider, for instance, that just 100 companies are largely responsible for 71% of global CO2 emissions between 1988 and 2015. These businesses are backed up by many wealthy investors, which finance their ventures.

So, if you are looking to build a strong investment portfolio but also make a positive difference towards climate change, how should you approach companies like this? Should you avoid them altogether and commit your money into other, more sustainable businesses, or should you invest in them with an aim to influence them towards taking greater care for the environment?

This is where we get onto the subject of “impact investing.” Broadly speaking, this approach to investing seeks to generate a financial return whilst making a positive contribution to society, governance or to the environment. On the subject of climate change, for instance, impact investing would involve investing in companies or funds which are either reducing their CO2 emissions, or which are proactively working towards a low-carbon economy (e.g. renewable energy businesses).

Impact investing is, therefore, different from “traditional” investing which historically tended to simply focus on investment returns, with little care for an investment’s impact on the world. It is also different from philanthropy, however, which usually cares little for investment returns and rather focus simply on changing the world.

At WMM, we and other financial planners are excited by the idea that you can combine investing with noble, philanthropic aims, such as creating a more low-carbon world.

How to build a “planet-positive portfolio”

So, how can you incorporate more of an impact investing approach into your wider portfolio? Broadly speaking, you should look at two things: look at “green funds”, and take a look at different funds’ strategic approaches when it comes to investing and climate change.

For instance, some funds might focus on offering investments into bonds or shares of companies which actively work to reduce CO2 emissions e.g. Green Bond Funds.

Other funds will not necessarily only focus on companies like these, but rather include companies from a wide range of sectors/industries which are trying to lower their carbon footprint, such as agriculture as waste.

Regardless of which approach you feel is better, the important thing to remember is to diversify your investments and not put all of your eggs into one basket. As much as you might believe passionately in the work that one company is doing to help the environment, please remember that it is still a company and it has the capacity to fail and lose you money.

By building a strategic portfolio with a well-balanced range of funds, you can make a positive difference to the world whilst minimising your investment risk exposure.

Conclusion

The world is facing some dangerous environmental threats, but we also live in exciting times regarding advances in green technology to try and address them. Innovations in wind, solar and geothermal production and distribution come to mind, as well as those in vital infrastructures such as electric/hybrid cars and clean power cells.

The important thing to remember with impact investing, however, is to maintain a healthy balance between its two tenants: generating a return whilst making a positive contribution to the world. It’s important to not lose sight of one whilst focusing on the other.

A fund might well be “green”, but if it is full of poor-quality stock and is constructed badly then you risk exposing yourself unnecessarily to the effects of poor performance. On the other hand, a fund might perform very well but gradually lose sight of its original intention to focus on companies which are minimising emissions (either their own, or overall).

A good financial planner will be able to help you keep an eye on these things, also ensuring that your investment strategy is on track with your own personal financial goals whilst continuing to make a positive environmental impact.

If you would like to speak to us about starting an impact investing strategy, then get in touch to arrange a free, no-commitment consultation with a member of our team.

If I try to invest my money ethically and responsibly, will I lose money? This is a question our financial advisers often hear in and around Oxford, and we’d like to address it here.

In our previous article: “What is sustainable investing? A short guide”, we talked in more detail about what ESG investing is, how it works and how investors can start implementing this approach more into their portfolios.

In this article, we’ll be looking more specifically at the personal, financial pros and cons of an ESG approach to investing. To quickly recap before we dive into this subject:

• ESG stands for “environment, society and governance”, and refers to a style of investing which seeks to create a positive impact on these aspects of our world.
• An example would be investing in a company which seeks to minimise its carbon footprint or address resource scarcity (E); mitigate labour/employment issues such as health and safety standards (S); and/or one which promotes transparency or gender diversity within corporate boards (G).

So, does ESG actually work from an individual investor’s point of view? Let’s look at that below. Please note that this content is for information purposes only, and does not constitute financial advice. Consult with an independent financial adviser prior to making any big investment decisions, such as those concerning ESG.

Does ESG work?

There is still a prevailing view within much of the financial services industry which goes something like this: “The top priority for an investor is shareholder value; investing for any other reason is simply going to lead to a terrible return.”

In other words, the argument goes that if you prioritise ESG issues when choosing your investments, you are essentially going to lose money. But is that actually true?

The answer is not a clear “yes” or “no”, but rather “it depends”. Certainly, there are cases where investing in a certain ESG fund or company would lead to a poor return for you, perhaps because their fundamentals are poorly set-up.

However, we would argue that in many cases it is possible to incorporate ESG into an investment portfolio with only a tiny reduction in performance. Sometimes, it can even be done with no sacrifice to your investment returns at all.

Remember, ESG is not a one-size-fits-all approach to investing, and you can implement it to a greater or lesser degree into your portfolio. It’s not necessarily an all-or-nothing choice, potentially involving a huge sacrifice in your investment returns. Speaking with a qualified financial planner will enable you to identify the degree to which you can safely transition to a more ESG investing approach, and ascertain the timescales and manner in which to do this.

Pros of ESG

There are many positive reasons to consider adopting more ESG investments into your portfolio. One important one is satisfying your own desire to feel good about your decisions. Simply put, it can feel immensely personally rewarding to know that your money is not only working towards your own future, but is also contributing to a better world.

Another important thing to consider is the long-term future of ESG itself. Whilst some have expressed the idea that ESG is a passing fashion (like green juice), the weight and scale of the worldwide movement towards ESG strongly suggests that it is here to stay.

The 2008 financial crisis provided a big wake-up call in the Western world for more systematic, good governance. Climate change is also not going away anytime soon, and ESG-conscious demographics such as Generation X and millennials are increasingly driving calls for solutions to these kinds of global challenges across the board – including in the world of investing and financial services.

Moreover, there is some evidence to suggest that there is a correlation between companies which “do well” financially (therefore, also for shareholders) and which “do good” in the way they conduct themselves and operate. This isn’t to say that all ESG investments are destined to success and provide a return – this is not guaranteed. All companies have the capacity to fail. However, there is something to be said for the argument that businesses which treat their staff, consumers, resources and environment with respect can result in strong fundamentals which often give them a strong foundation for long-term success.

ESG Cons

Whilst we are generally very positive about ESG investing here at WMM, it’s important that we try to be balanced and highlight some important aspects of this approach which can be disadvantageous to the individual investor.

Perhaps the primary danger of ESG investing is that you start to focus more on changing the world in your investment decisions, rather than on your personal financial goals. Whilst it is a noble thing at times to be self-sacrificial for the greater good, it does no one any favours to scupper your pension income, for instance, by neglecting your investment performance.

Proper ESG investing, of course, involves balancing these two important goals at the same time: achieving personal investment goals whilst making a positive ESG impact. Here, this is where working with a financial planner can offer you a lot of value. They can help you keep an eye on the companies and fund you are invested in, monitoring not just performance but also whether they are staying true to their professed ESG values.

Of course, it is also possible that by focusing solely on ESG investments, you miss out on a number of great investment opportunities elsewhere which hold out the potential for a better return. In these cases, perhaps you might want to discuss with your financial planner about how to balance your portfolio so that it includes some strong ESG elements whilst retaining some non-ESG components for specialist reasons or perhaps greater investment potential.

Or, perhaps you are willing and able to forsake an investment for the sake of the moral cause you believe in. Again, by consulting with a professional adviser you will be able to talk through these issues more carefully together, making an informed decision based on the best possible information available to you – rather than on emotion or gut feeling.

The phrase “modern slavery” tends to bring up all sorts of unpleasant images in our minds about forced labour, sweatshops and sex trafficking.

Few of us tend to associate it with the word “investment” or “financial services”, however.

Yet it is not just industries such as agriculture and apparel which involve this kind of exploitation. Financial services are exposed to it as well.

In this article, we’re going to explore some of the links between investment and modern slavery, and suggest some ways you can not only put your money to profit – but also towards making a real difference in the world.

Modern slavery: an overview

Many people simply are unaware of the scale of the problem of modern slavery. Globally, it is estimated that there are at least 40 million people living in “slave-like” conditions today. That’s actually more slaves than there were during the time of William Wilberforce, and the abolition of the transatlantic slave trade.

“Modern slavery” includes a number of inhuman practices such as debt bondage, human trafficking, deceptive labour recruitment, labour bondage, and child labour. Usually, people living in these conditions are exposed to regular threats, power abuses, violent acts, freedom deprivation and coercion.

Countries with a high prevalence of modern slavery include places like Somalia, Mauritania, Iran, Myanmar, Thailand and Cambodia. In fact, nearly two-thirds of the world’s modern slaves live in Asia or the Pacific regions.

Yet the Western world is not immune to the presence of modern slavery, despite various laws and norms to try and prevent it. In the UK, for instance, it is estimated that over 136,000 people lived under modern slavery conditions in 2018. Much has been done in the UK to try and address the problem of modern slavery, yet there is still more work to do.

Environments in the UK where you are more likely to encounter people living in these conditions include nail bars, car washes, cleaning areas and factories. So one way to make a difference is to keep an eye out when visiting these places and pay attention to the pricing. If your cash wash is going to cost you £5, then ask yourself if the workers there are really being paid fairly.

Yet is there more that investors can do to make a difference to help people living in modern slavery, beyond simply “keeping an eye out” in public?

Yes, we believe there is.

Investment & modern slavery

Tragically, only 0.2% of modern slaves are actually helped each year – despite the efforts of numerous NGOs, governments and international organisations.

To truly make a difference, therefore, people in the private sector need to mobilise and act. That’s where investors can step in.

It isn’t always easy to know exactly where to start in this area as an investor. Where exactly can I put my money in order to positively impact people’s lives, whilst making a return? How can I be sure that my money is actually being put towards a good cause?

We cannot possibly give a complete answer to these questions within one article, but we can suggest some good places to start.

First of all, it’s important to recognise that particular goods are more likely than others to have been produced under modern slavery conditions and within certain territories.

For instance, fish, sugarcane and cocoa from Indonesia are more likely to be produced by modern slaves compared to cars in Japan (although the latter is not risk-free).

By educating yourself about the kinds of supply chains most at risk to modern slavery, it becomes easier to select funds and investments which minimise, or avoid, these kinds of practices and conditions.

It’s also helpful to know which industries have a higher exposure risk to modern slavery. A recent study by the Australian Council of Superannuation Investors (ACSI) found that there are at least six industries which should be in your radar, as an ethical investor:

● Textiles & apparel
● Financial services
● Mining construction & property
● Food & beverages
● Agriculture
● Healthcare

The financial sector is an interesting one, as this doesn’t usually spring to mind when people talk about modern slavery. Certainly, the direct business operations of financial services are not highly exposed to modern slavery, due to the highly-skilled workforce which is needed (investment managers, accountants etc.).

However, these financial firms’ supply chains might be affected by modern slavery, such as their IT procurement and facilities management. Financial firms can also have a big impact on modern slavery through their choice of investment funds offered to clients.

By selecting funds containing companies with adequate anti-slavery policies and procedures, for instance, financial firms can offer clients more ethical investments to commit their money to.

What should we do?

It might surprise you to hear that the financial services industry, globally, is still rather underdeveloped with regards to its approach to modern slavery. Traditionally it has seen itself as “low risk” due to its skilled workforce. Yet many businesses are starting to wake up to the impact that their funds and supply-chains can have on modern slavery.

Ignoring the situation is no longer sustainable. Power and change tend to move where the money goes. So if investors can start to become more aware of the difference their money can make, and be offered viable and ethical assets and funds to invest in by the financial sector, then everyone could make much more of a positive difference.

Of course, it isn’t always straightforward. After all, what would happen to those people working in those awful factories if every investor suddenly pulled their money out of these companies, and put it into more ethical funds? Wouldn’t all those people lose their jobs and means of income, as meagre and pitiful as these might be?

Those are difficult questions and perhaps the answer lies in making people more aware of the problem of modern slavery and putting increasing pressure on the private sector to move closer towards where it should be on this subject.

As companies start to see where the winds of change are blowing, they can put measures in place to start to change course.

In April 2019, David Attenborough released his “Climate Change – The Facts” documentary which launched issues of environmentalism deeper into mainstream British consciousness.

At a similar time, we have had Greta Thunberg (the 13-year-old Swedish climate change speaker) chastise the UK parliament for “not acting in time” to address global pollution. London also simultaneously experienced Extinction Rebellion, where tens of thousands of protestors (including Dame Emma Thompson) spread across the city to demonstrate on the issue.

Clearly, concerns around the environment are becoming more centre-stage in the minds of many British people, who want to know what can be done to look after the planet and its precious ecosystem. That involves taking a hard look at our lifestyles such as the way we travel, consume energy and our eating habits. It also means taking a hard look at our money.

Investing and climate change are not necessarily two concepts which you might intuitively put together in your mind, but they are related in important ways. The companies, causes and activities we invest in, after all, often have a big impact on CO2 emissions, plastic pollution in different parts of the world as well as fragile ecosystems.

This touches on the subject of “sustainable investing” – an area of growing interest to our clients here at WMM, and for many investors across the country. Sometimes also referred to as ESG (Environmental, Social & Governance), sustainable investing offers a powerful approach to investing which balances investors’ desires to make a strong investment return, whilst also contributing to the good of the planet.

In this short guide, we’ll be sharing an overview of what ESG is, how it works and how you can start to adopt this approach more into your portfolio. We hope you find it helpful and interesting. Please note that this content is for information purposes only, and should not be taken as financial advice. To attain personalised, regulated financial advice into your own situation, please speak to us.

What is ESG?

When you invest in a company it will have its own track record with the physical environment (e.g. CO2 emissions), to society (e.g. employees’ working conditions) and towards governance (e.g. how it handles transparency and conflicts of interest). ESG is an approach to investing which focuses on committing investors’ money towards firms with a strong track record on these three fronts, whilst also maintaining a healthy return.

To reiterate, this approach isn’t about prioritising ESG over investment returns (which can perhaps be described as a more “philanthropic” or “charitable” approach). Rather, it’s more to do with balancing these interests, as they do not have to be mutually exclusive. Evidence suggests that you can combine the two elements and hold a portfolio that will make you feel better, whilst still delivering near market returns.

How popular is ESG as an approach?

Within the past decade, ESG has moved from a niche area of investing and more into the mainstream. The first “ethical fund” was launched in the UK in 1984 under the name of the F&C Stewardship Growth Fund.

Today, however, there are now many asset management firms in the UK which offer a selected set of investments to their clients within a particular field of ESG (e.g. gender workforce balance), and some even integrate an ESG approach into all of their funds and investments.

It is still fair to say that ESG is still not the “normal” approach when it comes to investing within the UK financial sector. Gradually, however, ESG is climbing up the agenda with the likes of Mark Carney (Governor of the Bank of England) stressing the importance of the environment along with regulators such as the Prudential Regulatory Authority, the Pensions Regulator and the Financial Reporting Council.

Questions to ask yourself about ESG

At this point, you might be highly interested in ESG as an approach to your own investments. Or perhaps you are concerned about how your money is affecting the environment but would prefer to gradually incorporate ESG as an element within your wider investment strategy.

Regardless, we recommend that you pose some important questions to yourself which you can then discuss in greater detail with your financial adviser. These include:

• Do you have a particular set of causes or concerns, which you care deeply about? For instance, perhaps you are deeply worried about the impact of certain companies’ effects on plastic pollution in the ocean. Or perhaps you are most troubled by the pace of deforestation in particular global regions. There might be funds which you can invest in, which help you steer away from these sorts of practices.
• Do you want to incorporate a philanthropic element to your portfolio? In other words, is there are a portion of your investment money which you are happy to see go towards a good cause, with the absolute return from it being less important?
• How does ESG fit into your financial plan when you are building a portfolio (the accumulation phase), compared to when you are drawing an income (the decumulation phase)? The stage of life you are in will have a big impact on the type of ESG investments which might be most suitable to your needs. For instance, you may not want to expose yourself to unnecessarily risking narrow ESG investments when your priority is to preserve your wealth in retirement, as you draw a regular income.
• Are you comfortable in perhaps accepting an absolute performance return through ESG? Some fund managers will argue that a very strict set of ESG investments will likely lead to lower returns, compared to if you took a more lax or balanced approach. You should ask yourself how “strict” you want to be with your ESG investments; and how this might affect your likely investment returns.
• Talk to your adviser about how investing ‘sustainably’ might affect you. Many people are finding that they can support the Planet whilst also supporting themselves, and that has to be a good thing for everyone.

For many people approaching retirement, they face a bit of a financial quandary.

It isn’t that they have too little money for retirement. Rather, the problem is they might possibly have contributed too much to their pension!

Is that even possible? Well, when you look at the situation in light of the Lifetime Allowance, t become clearer how having too much money in retirement might be an issue.

The Lifetime Allowance places a limit on the value of your pension pot(s). Once the pot goes over this threshold, then the amount that has gone over is liable to tax. In 2019-20, the threshold is set at £1.055 million. Anything above this could be taxed at either 25% or 55%, depending on how you choose to take the money.

This threshold has actually gone down in recent years. In 2010, for instance, you could keep £1.8 million in pension savings. The Annual Allowance has also changed (i.e. the amount you can contribute to a pension each year, without getting taxed). In 2010 you could contribute up to £255,000 without being liable to tax. In 2019-20, the limit is now £40,000.

All of this leaves some people in a bit of a pickle. What do you do if you have ten years until your retirement, for instance, but look set to go over the Lifetime Allowance – even if you made minimal pension contributions until then?

There is no universal answer to this question, and for most people speaking with a professional financial planner will help you identify the best options. For some people, Venture Capital Trusts (VCTs) might form part of the answer.

In the rest of this article, we’re going to briefly explain what VCTs are, how they work and how they can benefit a retirement plan. This content is for information purposes only and should not be taken as financial advice. For advice regarding your specific goals and financial situation, please contact a member of our team to arrange a free, no-commitment consultation.

VCTs: An overview

The name Venture Capital Trust might sound intimidating, but it actually is fairly straightforward.

A VCT is a highly tax-efficient way of investing your money into UK small businesses, such as startups. These businesses are not listed on the stock exchange, and whilst a VCT offers the chance for a high investment return it also entails a high degree of risk.
A VCT is, itself, a company. It is listed on the London stock market, and essentially it brings your money together with that of other investors to invest in small UK businesses. If those businesses make money, then so do you. Moreover, you get to keep more of it due to the tax incentives offered by the VCT structure.

Small businesses and startups are naturally more risky to invest in. Many of them will fail, which means you would lose your money. A VCT will attempt to spread out your risk by pooling your money will other investors, and investing it in lots of different small businesses which have been vetted / “stress-tested”.

To invest in a VCT, you can either buy shares from other investors who hold them in an existing VCT. Or, you can buy shares in a new VCT when it starts up. When you buy the shares, you get a 30% Income Tax relief on investments up to a total of £200,000 per tax year.

This is why VCTs have become quite an attractive option to lots of people approaching retirement, who are looking to minimise their potential tax bill by exceeding their Lifetime Allowance. You need to be careful though, as doing this yourself is likely to land you into trouble. Speak with an independent financial planner if you are considering this as an option.

For instance, certain conditions are imposed upon your use of VCTs. An important one to note is that you must hold shares in a VCT for a minimum of five years, if you want to retain the Income Tax relief. Bear in mind that it can also be difficult to find someone to buy your shares when you do eventually look to sell them.

One attractive feature of VCTs is that you do not pay Capital Gains Tax on any profits made from your VCT shares. The main condition is that the VCT you invested in must retain its status as a VCT, in order for you to retain this benefit. Any dividends you receive are also exempt from tax, although remember that you are not guaranteed to receive dividends.

Bear in mind that charges for VCTs tend to be high compared to other investments. Sometimes, a VCT will also levy a performance fee as well. So make sure you read the small print with your financial planner before committing your money.

Conclusion

VCTs are not a silver bullet for those facing tax constraints on their retirement plans, but they can be a viable option for some people with higher levels of wealth who are looking to minimise their exposure to needless tax.

Please be aware that with VCTs – and with any investment for that matter – your money is at risk and your investment value could go up or down, depending on performance. Whilst there is no compensation in the event your investment goes down, it is helpful to know that if your VCT goes bust then up to £50,000 of your money is protected under the Financial Services Compensation Scheme (FSCS).

On a final note, it’s important to say that we do not recommend VCTs are a replacement to sound retirement planning through a pension. VCTs can be a viable way to supplement your retirement plans and pension arrangements, but you should work with a professional financial planner in order to ensure these sit appropriately within your wider financial strategy.