How to make the most of retirement income is still stressing pensioners as interest on savings and rates of return on investments remain stubbornly low.
A year after the government introduced flexible access to pensions, many investors are still unsure about where to put their money to maximise returns.
With this in mind, the Association of Investment Companies (AIC) has asked some top fund managers for their advice.
Tim Cockerill, investment director at Rowan Dartington picked Perpetual Income & Growth, Bankers and International Public Partnerships.
Gavin Haynes, managing director of Whitechurch Securities recommended City of London Investment Trust and Troy Income & Growth.
Neil Mumford, a chartered financial planner at Milestone Wealth Management went for Bankers, Witan, Murray International, Perpetual Income & Growth, City of London Investment Trust and Troy Income & Growth.
Why pick this funds?
Tim Cockerill explained that maximising retirement income was a challenge for investors and their advisors.
“The best outcome is reliable income that increases over time to maintain living standards,2 he said. “The challenge comes in accruing the amount of cash needed to generate this level of income.”
Cockerill suggested investors should look for yields between 3% and 5% from equity investments because the value of shares should increase and an income is paid from dividends rather than selling assets.
“Perpetual Growth yields 3.2% and has a record of solid returns,” he said. “Bankers yields 2.8%, which is not that high, but has a dividend that has not been cut for nearly 50 years.
Controlling risk
Gavin Haynes felt the City of London Investment Trust was an excellent core holding.
“The trust dividend rises every year and has a record of beating the FTSE All Share Index,” he said.
“Troy Income and Growth is a cautious fund ideal for people relying on investment income for retirement. The yield is 3.4%, with growing dividends and a careful approach with risk-adjusted returns.”
Neil Mumford explained his picks were a blend of multi-asset unit and investment trusts that gave managers the tools to control risk while providing a decent level of income.
“Investment trusts within a portfolio is a must,” he said. “International trusts ay have lower yields, but come with dividends increasing year on year above inflation.”
