UK investors who have used their ISA and pension allowances are turning to buy-to-let property, venture capital trusts and enterprise investment schemes, according to Rathbones.
A survey of 3,092 UK adults with investable assets of up to £2.5 million showed that behaviour changes markedly once tax efficient savings options are exhausted, with wealthier investors far more likely to embrace complexity and risk in pursuit of higher returns.
Investment in buy-to-let property rises sharply with wealth, from just 4% among investors with £25,000-£250,000 of investable assets to 35% among those with more than £2.5 million. Allocations to VCTs and EIS follow a similar trajectory, increasing from 2% at the lower end of the wealth scale to 25% among the wealthiest respondents.
Isabella Galliers-Pratt, senior investment director at Rathbones, said: “Once they’ve used ISA and pension allowances, the next question we hear from clients is: where does my next pound go? As wealth increases, investors are more willing and able to take on higher levels of risk. Greater financial resilience gives them the confidence to explore opportunities beyond mainstream wrappers.
“The right route depends on time horizon, risk tolerance and personal tax circumstances. It’s important to balance the understandable desire to shelter investments from tax with the risks involved. Paying tax isn’t a bad thing – it typically means your investments have performed well.”
Beyond property and tax-advantaged schemes, the research shows a clear rise in the use of higher risk alternative assets as wealth increases. Appetite for cryptocurrencies and unquoted shares jumps from 5% among investors with £25,000-£250,000 to 14% for those with £500,000-£1 million and 25% among individuals with more than £2.5 million.
Rathbones said use of other taxable investment accounts, such as those holding shares, bonds and funds, also rises steadily, from 31% in the lowest wealth bracket to more than half (54%) of investors with £250,000-£500,000, and over two thirds (69%) of those with investable assets of between £500,000-£1 million.
Despite growing appetite for higher risk assets, the wealth manager said cash continues to be a cornerstone of UK portfolios. Some 94% of investors hold savings accounts or Premium Bonds, rising to between 95% and 97% among the wealthiest respondents.
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