FACING increasing pressure to resolve an ongoing pension crisis, the NHS is at risk of losing a crucial proportion of older doctors because of restrictions on annual and lifetime savings.

Breaching these allowances, which can include simply taking on overtime or extra shifts, can lead to unexpected tax bills and as a result, up to one in 10 doctors is considering quitting. Unless employees can regulate their pension contribution - something the Government is consulting on allowing them to do - they will not realise they have exceeded the savings limit until after the event.

While this is a major concern for NHS workers, high earners in the private sector can face a similar dilemma with restrictions on lifetime and annual pension allowances. These conditions are narrowing the options for investors seeking to save for later life and high-rate taxpayers in the UK are increasingly looking at alternative, tax-efficient saving methods such as venture capital trusts (VCTs).

Investors should, however, be wary of seeing the high-risk schemes as an alternative to pension savings - they generally carry a much greater level of risk than many other forms of investment.

VCTs aim to invest in small or start-up companies that have objectives to grow and develop. To encourage support for these businesses, the Government offers tax benefits for investors, reflecting the high level of risk involved.

The total value invested in start-up enterprises through VCTs continues to rise year on year, and since being introduced in 1995, VCTs have raised approximately £7.7 billion of funds, issuing shares to the value of £745 million in 2017/18.

With up to 30 per cent income tax relief, tax-free dividends and an annual allowance of £200,000, it’s an appealing option for savers. Some VCTs have also introduced new monthly investment models as a substitute for traditional lump-sum investments. But while this alternative payment plan means high-risk VCTs are starting to be viewed in the same bracket as pensions, it’s important to remember their purpose: to support businesses in their infancy.

While some companies will be destined for success and provide a substantial return, others will be more likely to fail. Over the years we’ve seen some clear winners, from Zoopla, the first VCT-backed £1bn company, to luxury travel provider Secret Escapes - but also several losers.

The Octopus Titan VCT is one of the largest players, accounting for around a third of all finance raised through VCTs in the past 12 months. Typically focusing on early-stage businesses, household names supported by the funding include snack subscription service Graze and clothing marketplace Depop.

Needless to say, past performance is no guide for future expectations, but the company’s experience and reputation means it is well placed to identify future successes. Octopus Titan has built a strong reputation for backing winners.

However, with such strict operating conditions, investing in VCTs can become complex. In 2014, Oxford Technology 3 VCT had its status withdrawn, following an HMRC ruling that it had breached the terms. The VCT was found to have invested more than 15% of its total assets into a single venture, which potentially exposed 800 investors to unexpected tax liabilities.

Cases like this, which would deal an especially damning blow for the less-experienced investor, illustrate that VCTs may not be the most suitable means of investment for the majority. While no investment offers a guaranteed return, the level of risk associated with a VCT is high and, as such, is probably best reserved for investors who have plenty of other assets to fall back on.

For the majority, the advice is to tread carefully when weighing up options for investing. VCTs would be best placed lower down the list of priorities. Crucially, they shouldn’t be seen as an alternative to pensions.

Alan Harvey is a chartered financial planner at Brewin Dolphin Glasgow.