Investment trust insider on JPMorgan Multi Asset – James Carthew: MATE, here’s a doughty divi for drawdown
You’ll have probably heard me say a number of times that one of the great strengths of the investment companies sector is its ability to adapt to changing circumstances. This week, I thought I would look at two funds that have not fulfilled their potential but have been revamping their investment approach – JPMorgan Multi Asset Growth & Income (MATE) and Aberdeen Diversified Income & Growth (ADIG). The prize, if they can demonstrate real improvement, could be considerable.
One of the great potential pots of gold that investment companies are keen to tap into is the pension drawdown market. As they approach retirement, self-directed investors who have built up sizeable amounts in self-invested personal pensions (Sipps), maybe with meaningful exposure to investment companies, will be wondering where to turn next? With long-term interest rates still not that far off historic low levels, annuities – which retirees traditionally bought to convert their savings into an annual income – may not look that appealing.
As a rough guide, each week online broker Hargreaves Lansdown publishes the best annuity rates available for a £100,000 pension pot. Currently, it says that for an annuity paying a flat amount for someone aged 65 and with no benefits for a partner, £100,000 would provide an income of £4,916.
The Office for National Statistics says a 65-year-old male can reasonably expect to live for 18.8 years and a female another 21.1 years. So, let’s say you live for 20 years after taking out the annuity. You hand over £100,000 at the start and get back £98,320 (20 times £4,916) over two decades. There is no pool of money left to pass on when you die and your annual income is eroded by inflation. It is not a great deal, is it?
If you want your income index-linked and for a partner to have the benefit of the annuity for a five-year period if you die within that time, your initial annual income would be just…
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