Albion predicts dividend drop for VCT

The dividend on the Albion Development VCT could drop by 50-75 per cent in 2011, according to its manager, amid signs VCTs could struggle to maintain their attractively taxed payouts.

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The trust, for which Albion is aiming to raise £25m, should sustain its current 8p dividend for 2010, according to Patrick Reeve, managing partner at Albion Ventures.

But Mr Reeve warned valuations may not be attractive enough for the fund to sell investments and support the payout, which he said could drop to 2-4p.

Income-generating VCTs have become increasingly attractive to investors in the wake of record low interest rates on cash accounts and the lowering of higher-rate tax relief on pension contributions to 20 per cent, compared with income tax relief of 30 per cent on VCTs.

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