A retail price inflation rate well in excess of 4% is playing a major role in eroding the value of investments, but the high risk, high return nature of VCTs could offer a potential solution.
Though they are broadly aimed at investors with some level of sophistication, VCTs are not beyond the means of ordinary investors - while some vehicles carry a high minimum investment level, for many the requirement is between £3,000 and £5,000.
As a spokesman for research group Allenbridge points out, VCTs are attractive for a number of reasons, not least that any capital gains made on a VCT investment will be exempt from tax.
"For an investment of up to £200,000 in any one tax year, investors receive an income tax reduction in the tax year of investment of 30% of the investment, provided the shares are held for at least five years."
"They will also receive tax free dividends that include both income derived from the underlying investments, and from capital gains realised inside the VCT portfolio."
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Like the majority of funds held within an ISA, VCTs are generally vehicles of between £10m to £50m that can spread their investments between a large number of companies.
However, as Ben Yearsley, head of VCT research at Hargreaves Lansdown, points out they are not an appropriate investment for everyone.
"VCTs are only really a consideration for investors with significant investment portfolios who can afford to take a long-term view and are comfortable with the risks of investing in smaller and sometimes unquoted companies,"
"We feel that they should account for no more than 5% to 10% of an equity portfolio. They are designed to pay out any profits only when the companies in which they invest are sold, so a long-term view of 5 to 10 years must be taken."
Yearsley points out that a major downside of VCT investing is that any losses incurred – bearing in mind that the value of venture capital companies will be more volatile than that of more mature businesses - cannot be offset against CGT. Additionally, due to the niche nature of the investments held within a VCT, the fund manager might find the underlying investments difficult to sell. This is exacerbated by the fact that the 30% income tax relief only applies to the purchase of new shares, meaning the secondary market for VCT shares is dampened.
"The manager may find the underlying investments difficult to sell and VCTs are exposed to substantially more risks than mainstream equities. There may only be one market maker for these shares which means VCT shares are harder to sell than mainstream equities."
Meanwhile, the sector could see itself become the focus of M&A speculation, following moves seen in recent weeks for increased outsourcing of VCT asset allocation, and as the current market conditions lend themselves to those attempting to become consolidators on the basis of new business model approaches.
One view expressed is that out of some 40 existing VCT managers, there may be 15 too many. Time will tell if this view is correct or not, but it is certainly the case that with managers fretting whether subscriptions will be filled this year - notwithstanding the notion that investments in VCTs should be held over the longer term to maximise gains - that there is scope to grow VCT businesses by acquiring other pre-existing ones.