How to Live Well in Retirement? Top Portfolio!

planning for retirement incomeHow many of us have thought about Retirement Income planning, planned ahead and invested in pensions and savings for a wealthy retirement (sorry senior Gap Years)? Not too many for sure! So how do you STRETCH savings and investments for possibly 30 plus years? First I am not a financial advisor so please don’t think this retirement income planning is advice – just a personal opinion!!

I have the State Pension, a small Teacher’s Pension, a SIPP with Hargreaves Lansdown and ISAs with iWeb (Halifax). Did you know the UK state pension is the worst in the developed world – even ranked below Chile and Mexico! So much for baby boomers being rich – they may have assets but little cash! Fortunately, in the mid 90s I switched to from an Endowment mortgage to an ISA scheme. As luck would have it I invested my monthly savings in the little known  (at the time) Neil Woodford’s Perpertual High Income fund. Magic! I am in the lucky position of being able to pay off the mortgage and still have a significant sum invested in ISAs.  Over the years I have added funds to the ISAs.

ISA Portfolio for Tax efficient Retirement Income

From my perspective, one of my main aims in retirement is to have sufficient monthly income which will last! If possible, the capital will not be eroded – note for the Labour Party: do not tax ISAs please (some hope with red McDonnell as possible next Chancellor!). Consequently a significant portion of my ISA portfolio is invested in Investment Trusts with dividends.

Why investment trusts? Over the long term and on average, investment trusts tend to deliver better returns than funds (unit trusts and Oeics). An additional advantage for income-seekers: unlike open-ended funds, they are able to hold back up to 15 per cent of the dividend income received from underlying holdings each year, and use it as a buffer for future dividend payments. As a consequence some trusts have increased dividends annually for over 40 years.  Below are 10 trusts with a 40 year-plus record of annual dividend increases:

  • City of London
  • Bankers
  • Alliance Trust
  • Caledonia
  • Foreign & Colonial
  • F&C Global Smaller Companies
  • Brunner
  • JPMorgan Claverhouse
  • Murray Income
  • Witan
  • Scottish American
  • Merchants
  • Scottish Mortgage
  • Scottish IT
  • Temple Bar
  • Value & Income

Elaborating: Merchants and City of London in the UK equity income sector are on annual yields of 5.1 and 4.1 per cent respectively (paid quarterly) – as of March 2018.  Also remember as it is in an ISA package you do pay tax on the dividends!! Capital value: since the low in the financial crisis of 2008, City of London share price has risen from 167.8 to 400p +

About 80% of my portfolio is invested in Trusts and the remainder in Funds and individual shares. Of the Trusts about 75% are in Trusts that yield good dividends. The other 25% is in Growth Trusts to get an increase in capital. I rarely trade the dividend bearing Trusts but dip in and out of the market for Growth Trusts – my favourites are Scottish Mortgage (tends to invest in tech companies like Facebook, Amazon, etc), Polar Capital Technologies  (again tech stocks), Monks, MANCHESTER & LONDON. I really like dividend yielding trusts with good dividend cover. If the market drops at least the monthly income is protected! Hopefully (and typically) markets recover fairly quickly!

Shares I rarely buy unless I see a solid company with a good dividend – these Vodaphone and Legal & General were bought in the last market dip

I keep about 15% as cash – to enable to dip into the market when the index retreats! Always take financial advice before investing.

Current Portfolio: TRUSTS, FUNDS, ETF and SHARES

RETIREMENT INCOME TRUSTS
Dividend (annual dividend in brackets)
BLACKROCK WORLD MINING (BRWM) : 4.02%
BLUEFIELD SOLAR INCOME (BSIF): 3.51%
CITY OF LONDON (CTY): 4.1%
CQS NEW CITY HIGH YIELD (NCYF): 7.2%
CUSTODIAN REIT PLC (CREI): 5.54%
EUROPE ASSET TRUST (EAT): 5.6%
HENDERSON FAR EAST INCOME (HFEL): 5.55%
HENDERSON INTERNATIONAL INCOME (HINT): 3.02%
INVESCO PERP ENHANCED INCOME (IPE): 6.47%
MEDICX FUND LTD (MXF): 7.26%
MERCHANTS TRUST (MRCH):  5.04%
MURRAY INTERNATIONAL TRUST (MYI): 3.87%
NORTH AMERICAN INCOME TRUST (NAIT): 2.85%
PRINCESS PRIVATE EQUITY (PEY): 5.57%
SIRIUS REAL ESTATE (SRE): 4.4%
TWENTYFOUR SELECT (SMIF): 6.57%

Growth
BLACKROCK EMERGING EUROPE (BEEP)
FIDELITY ASIAN VALUE (FAS)
FINSBURY GROWTH & INCOME TRUST PLC (FGT)

FUNDS
Growth
FUNDSMITH EQUITY (FUUNDS) – up about 40% since I purchased
Dividend
JUPITER MONTHLY INCOME (RWAABB): 4.6%
ROYAL LONDON STERLING EXTRA YIELD (RLSEB):  6.0%
SCHRODER INCOME MAXIMISER (SIAXIM) : 6.97%

ETF (exchange traded fund)
Dividend
ISHARES UK DIVIDEND ETF (IUKD): 5.56%

SHARES
Dividend
LEGAL & GENERAL (LGEN): 5.79%
VODAFONE GROUP (VOD): 6.29%

UPDATES to the PORTFOLIO will be listed in the COMMENTS below post.

On the radar for growth IBT (medical technology with good 4% dividend), and PCT, SMT (both excellent growth stocks but quite volatile), MONKS and WITAN. I have held all these Trusts in the past year.

Retirement Income Planning Advice!

So in summary I am looking for:

a) Dividend Bearing Trusts with good dividend cover and historically unbroken dividend increases
b) Funds with top dividend yields
c) ETFs with growth and dividend
d) Established shares with good dividends
e) Trusts / Funds with consistent Growth.
f) Wrap in ISAs (so no capital gains tax and dividends tax free too) – now £20,000 pa

Resources
Money Observer Magazine and their website
Hargreaves Lansdown – extensive information, dividends, and performance
Investment Trust Insider – good articles and recommendations
Which Investment Trust – comprehensive review of  individual Trusts
Dividend Data: Ex-Dividend dates, dividends and payment dates
Morning Star Tools – good for performance ranking Trusts
TrustNet – good for news, performance and ranking by dividend
The Association of Investment Companies is the United Kingdom trade association for the closed-ended investment company industry (ie Investment Trusts). This has plenty of statistics and performance of Investment Trusts. Some useful links:
Analyse investment companies (for example, dividend tab results allow sorting of % dividend payout).
Latest Dividend Heroes

Other sites for charting and analysis: Barchart.com and Trading View

Of course, we have been in a bull market for several years, and a recession is inevitable at some point. Be prepared by having an action plan for a recession. Your portfolio needs to reflect the degree of risk you are prepared to take. Prices can drop, and your capital is at risk. In the meantime, have a happy Retirement!

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12 Comments

  1. UPDATE
    Have sold BLACKROCK EMERGING EUROPE (BEEP) today. This trust has a large element of Russian stocks so may be a good time to exit at a small loss!

    Bought Shires Income (SHRS) describe themselves as “The investment objective is to provide shareholders with a high level of income, together with the potential for growth of both income and capital from a diversified portfolio substantially invested in UK equities but also in preference shares, convertibles and fixed income securities!”

    Dividend is an excellent 4.8% and good capital growth potential.


    1. Update: SHRS for above average dividend – but capital growth good in the last 6 weeks – up over 5.5%

  2. Funds UPDATE
    I have a small portfolio of funds which I tend to review once a year. FUNDSMITH EQUITY which was bought in September 2016 is 40% up. ROYAL LONDON STERLING EXTRA YIELD BOND was purchased in April 2017 and is up 3% with an annual yield of 6% – so very happy with income. JUPITER MONTHLY INCOME and SCHRODER INCOME MAXIMISER have provided good income too but I can do better!. I follow the Income Portfolios on Money Observer. They have sold these 2 funds and replaced them with Premier Optimum Income Fund and Artemis Income Fund as their performance has been superior. I have followed suit.

    1. Premier Optimum Income Fund and Artemis Income Fund – both up: just over 5.5% and just less than 1% respectively. Of course, early days!

  3. Taken small positions in the following Investment Trusts – IBT (International Biotechnology Trust) at 560p and ATT (Allianz Technology Trust) at 1290p. IBT to recover after sell-off and 4% dividend. ATT – recovery after selloff. I have chosen ATT over PCT as ATT performance has been better: see chart


  4. Bought small holding in the builder Persimmon (PSN) at 2,747p. Dividends are expected to continue outstripping the broader market with projected rewards of 215p and 221p for 2018 and 2019, respectively, yielding 8.1% and 8.3%. Growth of profits is predicted to increase by 3% in 2018.Next dividend payment is in July.


  5. Added to my holding in Princess Private Equity (PEY). Money Observer in their Trust Awards 2018 pick PEY in the Best Private Equity Trust category

  6. Sold Legal and General for 5% cash profit as it approaches a resistance level. L & G has gone ex dividend so 11.05p per share paid in early June. Lovely Jubbly! With proceeds have increased my holdings in Princess Private Equity (PEY) PEY goes ex-dividend in early June. Annual dividend yield just less than 5.5% paid bi-annually.

    1. LGEN has fallen back from the resistance level as I suspected, and is hovering at the 267p support level. If it breaks through, the next support is at about 252p. Would consider investing if it bounces up from 252p.

  7. In view of the thawing in trade relations between USA and China, have purchased a holding in Fidelity China Special Situations (FCSS). Hopefully, the renewed discussions over trade wars between the two countries will provide impetus for Chinese stocks.

  8. Sold HENDERSON INTERNATIONAL INCOME (HINT) for just under 10% profit with a dividend payment to be received! After a good analysis of Eddie Stobart (STOB) with share growth predicted and a potential annual 7% dividend yield – ex div in mid June – bought at 253.5p. Targeting a share price of 300p


    1. Sold Stobart for a small profit on news of contract with Ryanair at Southend airport. The in-fighting in Stobart makes me nervous however. Captured the dividend (about 1.8%) before sale though.

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