Summary

Investing for income is a staple of investor activity in the UK. Some of the biggest funds and best known fund managers are focused this way.

With a growing population of investors looking to boost retirement income, and in recent times the poor returns on cash because of record low interest rates, it remains as popular a choice as ever.

There are different ways of accessing income. Investing in companies committed to paying dividends was and remains the route most investors will take. However, the lower inflation period enjoyed in the past couple of years in particular coupled with risk aversion has brought fixed interest to the fore, with assets such as corporate and government bonds being considered for inclusion in investors’ portfolios more than may have been the case up until just a few years ago.

Changes have also occurred in the definitions of income funds. The Investment Association split up the universe of equity income funds in 2009, resulting in two new sectors: IMA UK Equity Income, and IMA UK Equity Income & Growth. The sector definitions of both are intended to highlight funds that generate a historic yield of 110% and 90% respectively in excess of the FTSE All Share. The Association also lists six key fixed income sectors – UK Gilts, UK Index Linked Gilts, Sterling Corporate Bond, Sterling Strategic Bond, Sterling High Yield, Global Bonds - and a mixed asset sector – IMA UK Equity & Bond Income.

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