≡ Menu

Compare investment trusts for retirement income

Today’s retirees have a lot of freedom in how they use their pension funds. For relatively savvy and wealthy Monevator readers, turning some of a pension pot into an income-generating machine via investment trusts may be attractive.

You could use low-cost passive funds such as ETFs to generate a retirement income instead. You might even choose to gradually sell down your capital – and that’s fine for some, too.

However others may prefer to pay up for actively-managed trusts. Our faculties decline as we age, and owning several trusts dedicated to preserving their income payouts may be a life-saving option in the worst case, and a reassuring one regardless.

The table below lists trusts that Monevator writer The Greybeard believes are worthy of consideration by retirees. (Note: It’s not an endorsement, and it is not personal financial advice. Please do your own research and consider alternatives such as annuities.)

{ 18 comments… add one }
  • 1 Topman May 18, 2015, 2:30 pm

    I can’t get the s/s to scroll any further than Finsbury Growth & Income.

  • 2 The Investor May 18, 2015, 3:07 pm

    @Topman — Finsbury Growth & Income is the last entry on the list. I can’t figure out how to turn off scrolling in this embed — if anybody knows how to do it, please do report here in the comments! 🙂

  • 3 Paul Simister May 19, 2015, 7:57 am

    This is very useful.

    Investment trusts is something that I’ve always felt I should invest in but, because of the old regime of commissions, I felt it was hard to do for retail investors who weren’t extremely interested in the stock market.

  • 4 Frank May 19, 2015, 11:46 am

    Re Investment Trusts.

    It is no longer true that ITs have lower TER than UTs.
    ITs usually have performance fees which are, not only terribly high, but also written in such a way as to be completely unintelligible. Furthermore, while their prices change from premium to discount according to the will of the Gods on mount Olympus, they are always at a premium when you wish to buy and at discount when you wish to sell. They are too complicated for me and evidently so for the overwhelming majority of investors.
    Regards

  • 5 Debbie May 19, 2015, 6:38 pm

    Getting rid of those pesky scrollbars: select the range you want, not the whole worksheet. Works for me.

  • 6 Debbie May 19, 2015, 6:47 pm

    Sorry, I think I just sent you the wrong link:
    https://jsfiddle.net/4kyn6z6k/

  • 7 The Investor May 19, 2015, 7:03 pm

    @Debbie — Thanks, I thought it was something like that but we’ve had some technical difficulties to date. Will take heart and try again!

  • 8 The Investor May 20, 2015, 8:48 am

    Update: Fixed! Thanks again Debbie.

  • 9 Maree February 16, 2016, 11:57 am

    This is very helpful. It would be great to also have a column for what sector / category the trust covers.

  • 10 Mark May 12, 2016, 9:53 am

    Apropos The Greybeard’s comment that some ITs offer insufficient yield to interest investors in drawdown, this is true, but it isn’t the entire story. Some of the lowest-yielding trusts, based on current share prices, are renowned for increasing their distributions much faster than inflation. Someone who buys into such a trust now, in the accumulation phase of their investing life, might find the distributions highly attractive when measured as yield on original purchase cost, perhaps 15 or 20 years down the line.

  • 11 moueecatcher007 May 12, 2016, 5:35 pm

    But have factored in your platform charges? If you’re paying an annual % on UTs, ITs are likely to be significantly cheaper in the long run if you buy in reasonable chunks and then hold. And you could always buy on a discount and sell on a premium …

  • 12 Neil May 17, 2016, 4:08 pm

    Dividend reserves are also very useful with IT’s and their habit of putting aside money for continued payment of dividends during weak markets is excellent.

  • 13 Mark Meldon May 19, 2016, 4:14 pm

    Well, at last some updated news about ITS for SIPPs! The majority of my SIPP clients (I am an IFA) hold a mix of many of the trusts in the table along with some index funds like the VT Smart Dividend UK Fund. With a good value SIPP and decent trading platform the running costs of such arrangements, certainly for those luck enough to have larger pots are very attractive. I have a few clients where the yield from the portfolio easily covers their current income drawdown requirements.

    ITs have never paid commissions to IFAs, by-the-way.

  • 14 Peter July 6, 2017, 8:29 am

    Might somebody be willing to answer my novice question? I’ve searched online to no avail…

    Is the quoted yield for such trusts typically NET of fees or, for example, where the yield is quoted as 4.5% and the charge as 0.6% should I take that as an effective yield of 3.9%?

  • 15 The Investor July 6, 2017, 9:09 am

    @Peter — Such a yield should be quoted by data providers net of any fees. In the case you give, the yield would be 4.5%.

    Remember though that the yield you’ll buy into fluctuates from day to day as the trust’s share price changes. A table of data is just a snapshot in time. You need to know what the forecast dividend payout will be in pence for the full year to come (most years with the sort of established trusts listed here it will be the same as last year, plus a small increase for inflation) and the share price, and then you can work out the forecast yield for yourself.

    For instance, if you believe the trust will pay 15p over the next year and its shares currently cost 300p, then the yield you’re buying into is 15/300 = 5%.

    One thing that might not help if you’re a novice but is a big advantage in my view of Investment trusts is they are basically listed companies that make investments (as opposed to mutual funds etc, which are a different sort of vehicle, as you know). So you can dig into their annual reports to find out all sorts of interesting information about them.

    Here’s the 2016 report for City of London trust, for example: http://bit.ly/2tOIzck

    There’s lots of clear and easy to understand information at the front for shareholders, but you can also dig into the detail if you’re so inclined.

    Make sure you also know all about premiums and discounts: http://monevator.com/investment-trust-discounts-and-premiums/

  • 16 The Investor July 6, 2017, 9:15 am

    Oops, edited my reply as I said “forecast yield” instead of “forecast dividend payout”, which is only going to confuse matters. Please read latest edited comment above, should be clear now I hope! 🙂

  • 17 Peter July 6, 2017, 9:39 am

    @Investor –

    Wow, fantastic. Thank you for your explanation which, like the rest of this site, clarifies and educates so cleanly.

    For the benefit of others, here is an online tool which takes the work out of that particular calculation you describe (based on a trailing 12-month dividend payout and the current spot price) also and allows you to see historic tables of dividend payouts.
    http://www.dividenddata.co.uk/dividend-yield.py?epic=CTY

    I think the principles are very clear but, before taking the plunge, I wanted to be confident that the investment vehicle really does do what it says on the tin (so in your example, the 15p gross figure would be all mine based on a 300p investment).

  • 18 Richard September 21, 2017, 7:33 am

    This is really useful. I have provided a link to this many times to others.
    Any chance we could get an update on this?
    Pretty please
    R

Leave a Comment