Launch helps to mitigate IHT: Foresight

The Foresight Inheritance Tax Investment Solution invests predominantly in infrastructure assets that qualify for business property relief, giving investors exemption from inheritance tax on the value of their investment after two years.

Jamie Richards, head of infrastructure for the alternative asset manager, said infrastructure assets, such as long-term government-backed projects and solar power PV arrays, provide capital preservation and solid, predictable returns.

He said: “It’s a perfect time to be investing in government-backed infrastructure. The government wants to see job creation while investors want stable, low-risk returns and shelter from IHT.”

Investing in infrastructure has previously been the preserve of institutional investors. However, Mr Richards said the asset class has “massive attractions” for retail investors when coupled with tax efficient benefits.

He said: “Institutional investors have found it easy to invest in infrastructure but this is a first for retail investors and is what makes this so exciting.”

The portfolio will invest in ground-based solar PV arrays as well as other infrastructure projects, such as private finance initiatives and other long-term contracts with government or blue-chip counterparties. This could include building schools and libraries.

The minimum investment into Foresight ITS is £50,000 and the target return is 3 per cent a year, with a 5.5 per cent initial fee, split between the IFA and Foresight.

The annual management charge is only levied on returns over 3 per cent. For instance, if the return is 4 per cent, the investor gets three per cent, and Foresight gets 1 per cent.

Mr Richards said: “A number of infrastructure teams in banks have disappeared because of economic issues so there are relatively few managers like us with the ability to deploy this money into infrastructure projects the government want to see built.”

He said the main difference between Foresight ITS and those of his competitors was the length of the contracts of the underyling investments.

He said: “A PFI will have a 20 to 25-year revenue stream in place, backed by the government, so we can sit on these assets for that length of time knowing that the money is delivering a return and capital is preserved.”

Additionally, the investment solution is not necessarily for wealthier individuals. Mr Richards said some people who might not be regarded as high-net worth have an inheritance tax issue because of the value of their properties, while younger investors in the 40-plus age group like the product for other reasons.

He said: “For younger investors, after an initial two-year period they can transfer the assets into trusts where they will have more flexibility on what they can do with them.”