One in five, or 20 per cent, say they will invest more in income funds, 16 per cent in growth funds, and 15 per cent offshore. More than 300 users were polled for the results.
“We have seen an increase in demand, but not recently, for income over the last 18 months as interest rates have been low. But, I cannot say we have noticed any switch into income funds because of the threat of CGT going up," says Darius McDermott, managing director of Chelsea Financial Services.
"I think the fact that cash is no longer paying and investors have to look elsewhere for income is more of a driving force to income rather than the threat of CGT.”
He says the Schroder Income Maximiser has been popular with his clients recently. The fund, which is managed by Thomas See, has been in the first quartile over both one and three year periods. Over one year it returned 21.98 per cent. Over a three year period the fund made a loss of 5.08 per cent compared to its IMA UK Equity Income sector, which lost 21.30 per cent.
Schroder Income Maximiser, 3-yr
Source: Financial Express Analytics
Keith Churchouse, director at Churchouse Financial Planning, says the results of the Trustnet poll confirm the mixed view among the industry on what is going to happen with regards to tax.
“It is my view that the government will increase the headline tax rate under CGT from 18 per cent to, say, 40 per cent. If someone is achieving their CGT allowance then above that they may decide that they don’t want to use accumulation funds and they may prefer income funds, but then the income funds will be taxed at dividend rates anyway,” he says.
“I think if anything most people will stay in accumulation funds. I think everybody is lined up nicely to accept that whatever comes out on 22 June will be pretty significant in the way they change the tax. I would say that the accumulation funds have it and I would be surprised if investors went to income funds.”
Martin Bamford, managing director at Informed Choice, says any changes to CGT on non-business assets will prompt investors and their advisers to review existing investment strategies.
“Making full use of ISA allowances each tax year will continue to be important and other tax wrappers could also grow in their appeal. Income funds could also become more popular, although probably not for higher rate and highest rate taxpayers where the tax charges remain excessive,” he says.
“Overall, it will be important for investors not to allow the tax tail to wag the investment dog. Whilst the temptation exists to tie up your money in investment vehicles that reduce the tax burden on returns, the most important thing is having the correct investment strategy for your risk profile and objectives.”