One of those who gave their views to the AIC was James de Sausmarez, director and head of investment trusts, Henderson Global Investors, who said: “Many self-directed private investors have supplemented their pensions for many years by enjoying an attractive income from investments in investment trusts. It is good news that the [UK] Government’s pensions changes will mean that a wider range of investors will benefit from what investment trusts have to offer.”
He added that investment trusts have long deserved “a bigger slice of the pension pie”, as they also provide the potential for an excellent means of growing capital while saving for a pension, but can also offer the possibility of a stable and growing income stream in retirement.
While Simon Cordery, head of investor relations and business development, F&C Investments said that investment trusts are widely held in many personal pension plans: “For a number of years the various shareholder registers of F&C managed investment trusts have seen a rise in the number of shares held via SIPPs or other pension wrappers.”
He cited several reasons for this, including evidence over the long-term that the closed-ended structure can produce better investment returns than open-ended finds because of gearing, long-term investment horizons and access to illiquid opportunities that open-ended funds have difficulty with.
He also pointed out the investment trust’s ability to reserve a proportion of the annual dividend receipts to enable payouts spread over the investment cycle.
‘Dampen volatility’
Simon Crinage, head of investment trusts, JP Morgan explained further about how dividends can be paid out of income or capital gains, and revenue reserves can be used to dampen volatility of payouts.
“JP Morgan Claverhouse Investment Trust has used this flexibility to provide shareholders a steadily increasing total dividend for the past 41 years,” he said, adding that he anticipates the budget pensions changes will result in more retirees seeking an investment-led solution.
Finally, Robin Stoakley, managing director, UK intermediary, Schroder Investment Management, said: “While we do not see this as the death knell for the annuity, which for many will remain an appropriate solution at some stage during retirement, we do expect to see large numbers of investors opt for income drawdown given the potential for enhanced income, continued growth and capital retention.”
To read more about how annuity sales have fallen since the announcement of pension reforms in the UK spring Budget, click here.
