Treasury Drive for Patient Capital Investment Could Pose Risk To Pension Savers

A national IFA has warned that pension scheme members should not be corralled into high risk investments to finance tech start-ups.

Treasury Drive for Patient Capital Investment Could Pose Risk To Pension Savers

Commenting on the Government’s consultation with pension providers, to encourage the use of defined contribution pension investment into start-up companies, Kay Ingram, Director of Public Policy at LEBC warned that this type of investment was unlikely to pose a suitable level of risk for the average pension saver.

“While encouraging start-up capital investment is a worthy aim of the Government, it is unlikely to be a suitable investment risk, except for the wealthiest savers. The higher returns possible from this type of investment come with higher risk of losses and are usually only considered suitable for those with surplus assets and capacity to wait for the investment to deliver, without needing access to their funds.

“A more suitable proposal would be to offer these higher risk investment opportunities to wealthier savers, who have funds in excess of the Lifetime Allowance for pension savings (£1,055,000 from next April).

“They are more likely to have the capacity to bear the risk of loss. If they were offered forgiveness of the 55% tax charge on funds in excess of the Lifetime Allowance in return for investing in patient capital we believe many of them would take this up,” added Ingram.

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