Jason Hollands of Tilney Bestinvest has warned that using investment trusts to generate income from a pension could prove expensive.
The use of investment trusts has been suggested in a number of quarters for savers looking for income and capital growth in a post-annuity landscape.
But Mr Hollands, managing director for business development and communication, said: “In one sense you should be agnostic because finding good investment managers is a struggle and you shouldn’t ignore the investment company sector.
“But income at the moment is in such short supply, so a lot of high-yielding trusts are trading at a high premium and it is quite hard to find ones that are not looking a tad expensive.
“Venture capital trusts are very high-yielding but alongside a pension they can be a useful part of the mix.”
In April the Association of Investment Companies released figures which showed the UK Equity Income sector delivered 4.82 per cent annual dividend growth, with the trade body saying this made “compelling reading” for investors looking to draw an income in retirement that outstripped inflation.
Adviser view
Jason Butler, a financial adviser with London-based Bloomsbury True Wealth, said: “I don’t think it makes sense to be focusing on high yielding investments because you are giving away future growth.”
