Are EIS Funds the new retirement planning tool for high earners? asks Oxford Capital
EIS offers tax relief on investment and on exit – coupled with IHT protection.
1 March 2010, Oxford, UK
Diversified EIS Funds are becoming an important part of retirement planning for people earning over £150,000 from April 2010, believes Oxford Capital Partners. With the changes in the former pension planning rules, with high earners being restricted to 20 per cent tax relief on pension contributions, their pension income on withdrawal subject to income tax and limited potential to pass accumulated pension savings onto their heirs – EIS Funds are increasingly recognised as a viable alternative for retirement planning as they offer tax relief on new investments, tax relief on returns and the ability to pass the entire portfolio to heirs free of inheritance tax
Ted Mott, chief executive Oxford Capital says:
“From April, pensions will be less attractive to people earning over £150,000 as higher rate tax relief is progressively removed and anyone earning over £180,000 will only receive basic rate tax relief.
“Anyone looking for a viable alternative to pensions should seriously consider diversified EIS Funds. Income tax relief on investment will be the same at 20 per cent – but unlike pensions there is no tax to pay on returns, no need to annuitise after age 75 and no restrictions on passing on accumulated EIS Fund investments to heirs once qualifying investments have been held for two years.
“Some people may consider EIS Funds to be a higher risk investment to a pension plan – but we believe the risks are significantly overstated – particularly in the context of long term retirement planning. Of course there is risk in investment, whether in public or private equity, but by using funds such as Oxford Capital’s EIS Funds, investors receive a balanced, diversified portfolio of growth companies, spread across industry sectors and development stages. Our first fund returned our investors 164 per cent growth over 7 years and on average we have doubled investors’ money on every investment we have realised in full.
“What’s more if one of our portfolio companies does fail, then the government also offers loss relief which in conjunction with the income tax relief can potentially be up to 60% of the value of the original investment. After a decade when the supposedly low risk S&P index dropped in value by 10 per cent, and the FTSE 100 dropped by 18%, the idea that a tax efficient, well balanced growth portfolio of emerging companies is high risk is debatable.”
The Oxford Gateway EIS Funds invest in a portfolio of entrepreneurial early and growth stage businesses. Oxford Capital has a ten year track record of picking winners with previous investments including: Arieso, a leader in network optimisation solutions for wireless networks, Helveta, the world’s leading system for tracking sustainably harvested timber, and Oxitec, one of the world’s foremost insect pest management businesses endorsed by both the Gates Foundation and the Wellcome Trust.
The Oxford Gateway EIS Funds are designed for private investors with a minimum investment of £25,000, up to a maximum of £2 million. The EIS fund structure was pioneered by Oxford Capital and has the benefit of a fully discretionary portfolio service approach. The funds have an initial fee of five per cent and an annual management fee of two and a half per cent. There is a performance fee of 20 per cent of the funds’ net return after 100 per cent return of investors’ capital.
Many observers now consider EIS Funds to be a valuable wealth management tool, sitting either as an overlay to existing core strategies or as a new alternative to be added to portfolios.
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