John Maynard Keynes once remarked that the avoidance of taxes was "the only intellectual pursuit that carries any reward". But you don't have to be an intellectual - or an economist - to appreciate the virtues of two schemes that first pay you to invest, then allow you to keep any most of the rewards you accrue on those investments.
Welcome to the world of venture capital trusts (VCTs) and Enterprise Investment Schemes (EIS), both of which are structured to allow those who understand the risks to invest in fast-growing smaller companies. Very few vehicles offer better tax breaks; conventional pensions may attract tax relief on contributions, but the income eventually secured is subject to tax and there are lots of limits and restrictions. VCTs and EIS offer up-front tax relief with tax-free profits and dividends too. There is no lifetime limit on contributions, you don't have to wait until you’re 55 to access your funds and there is no requirement to buy an annuity.
They can certainly be risky, because of their bias towards smaller companies, and you should always be wary of letting the tax tail wag the investment dog. But if you've already reached your pension pot's lifetime limit (£1.5m in the 2012-13 tax year), or you've used other key allowances like the individual savings account (Isa) and capital gains tax, they are an obvious next step. You need to make sure you understand the different characteristics of each, though, before you can make an informed choice. Below, we run through the characteristics of each and outline some key picks.