Taking advantage of new Isa rules allowing investments in Aim is a new product from Stellar Asset Management.
The Stellar Aim IHT Isa, which became available in November 2013, will take advantage of the tax reliefs available through a standard Isa investment alongside those available through business property relief on Aim holdings.
Portfolios of around 20 stocks will be held in individual investors’ names but managed by a Stellar manager.
An optional life assurance benefit is available on the product to protect against losses should the amount held have fallen below the initial investment at the time of death. It costs 2.5 per cent per annum, reviewable every two years, and has a maximum benefit of £250,000.
There is no initial charge for the Isa and an annual management charge of 1.25 per cent applies. Investors can withdraw money at any time.
This product differs with its optional insurance, which may add extra peace of mind for some clients.
Stellar is not the first firm to come up with this idea; Octopus Investments launched a similar product earlier this year, and no doubt other IHT specialists will have this on their radar.
When the government announced plans to allow Aim stocks in Isas, the initial reaction was that there would not be much interest. Aim stocks have a very different risk profile to fully listed stocks and are far less liquid.
But for those looking for an IHT solution, an Isa vehicle designed with that in mind opens up a greater amount of tax relief. Utilising it fully depends on good planning having been in place. If an investor does not hold much of their assets in Isas, they cannot suddenly throw several hundred thousand into one. The only way a significant investment into an Isa-based product can happen is via a transfer of Isa funds built up over years.
Assuming that happened, the potential returns and tax relief are compelling. The graphic demonstrates what could have happened on a £300,000 investment if this product had been available three years ago.