Back in May, Richard Romer-Lee, managing director at Square Mile Investment Consulting & Research, discussed the need for alternative sources of income following the Chancellor’s recent announcement that annuities will no longer be compulsory from 2015. For many clients it is important to identify funds which will give them a relatively high level of income now, whilst preserving their wealth over the longer-term, either to pass on to their successors or to use as a lump sum themselves at some point in the future. The actual level of income paid by such funds will depend very much on market conditions and prevailing interest rates, because to pay out more income than is readily available could lead to capital volatility and even, perhaps, erosion.
For other clients we recognise that the absolute level of income is the overriding concern, allowing them to plan ahead for expenditure on school or nursing home fees, for example. For such investors a relatively certain level of income can be more important than preserving capital. Of course, no fund can guarantee a specified level of income into perpetuity in the same way that an annuity can, but as part of our research process at Square Mile, we look to identify funds which aim to maintain a high and stable level of income, irrespective of market conditions.
Five such funds which we have identified might meet this outcome are:
