InvestmentsApr 2 2014

Investment trusts ‘set for boom’

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The Association of Investment Companies’ communications director said the Budget changes allowing more people to draw down their pension savings in full would boost demand for investment companies.

She said: “This is a massive opportunity for investment companies, as their structure allows them to pay increasing dividends much more consistently than open-ended funds.”

Investment trusts can retain up to 15 per cent of their annual income in reserve, affording them the choice to draw on these reserves to pay dividends in years when underlying investments perform less well.

Ms Brodie-Smith added: “This is why the City of London Investment Trust has been able to pay an increasing dividend for 47 years in a row.”

Stephen Message, manager of the Old Mutual UK equity income fund, said: “Pension funds have traditionally been more heavily invested in gilts and lower risk bonds, but these changes will give people the option to grow their pension pot by investing in dividend-paying stocks.”

Adviser view

Jason Hollands, managing director of business develop-ment for London-based Bestinvest, said: “In many cases an annuity could still be the right answer, but in the absence of an annuity, investors looking to fund a potentially long period in retirement need products that can deliver a cocktail of yield and inflation-protection.”