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Scrap LTA for patient capital investment, gov't told

Scrap LTA for patient capital investment, gov't told

Savers could be allowed to breach the lifetime allowance if they invest in patient capital according to a review commissioned by the government.

In November 2016 entrepreneur Damon Buffini was commissioned by the government to review the patient capital industry.

Today the panel, which includes fund manager Neil Woodford (pictured) and Legal & General chief executive Nigel Wilson, reported back on the capital review market.

One of the recommendations of the report was that defined contribution (DC) pension schemes include an option to allow members to allocate some of their pension to a patient capital investment vehicle (PCIV).

'Further retail investment could be encouraged through a specific higher annual and/or lifetime pensions allowance for investments with the PCIV,' the paper said.

‘Given the low interest rate environment, the panel believes adjusting the pensions allowance for the PCIV would tap into a significant demand. However, any adjustment made for PCIV investments alone would be likely to bring the PCIV's activities within the scope of the state aid rules, and require prior authorisation by the European Commission,’ the report said.

Steve Webb, Royal London’s director of policy, said this could be a positive idea but warned it would not be suitable for all investors.

‘Higher limits for those investing in 'patient capital' could be a revolutionary way of attracting serious money into this form of investment.  But this would generally be suitable only for more sophisticated investors on the basis of good advice, and might be too risky an asset for those on more modest earnings to put a large proportion of their savings,’ he said.

In his Budget speech, chancellor Philip Hammond said enterprise investment scheme limits would double, and the government would look at facilitating pension funds investing in patient capital. 

Neil Woodford, head of investment at Woodford Investment Management, said: ‘The new £2.5 billion investment fund announced in today’s Budget will be transformational for Britain’s economic future.

'The ability to access capital is profoundly important to these businesses and the significant improvement in the amount available will help young, knowledge-intensive British businesses to scale-up.’


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