Income: the cornerstone of a comfortable future

We’re living longer and healthier lives, which increases the need for a regular income that can last longer too and for the duration of retirement – the cornerstone of a comfortable future.

With traditional pension planning, investors are often encouraged to build the biggest investment pot and then “encash”, or sell, units or shares to generate the necessary income each year. However, if the value of the units (or shares) in the funds that you are invested in fall, you then need to sell more units to generate the same level of income. This could mean that you start to use up your pot of units too quickly. What if your pot runs dry, leaving you without enough units to generate the income you need?

At Premier Miton, we believe there’s another way. We’re passionate about the benefits of a ‘natural income’ approach as a potential solution for providing a regular and long-term income stream in retirement. For example, the aim of our Premier Miton Cautious Monthly Income Fund is to produce a regular income for investors as well as capital growth over the long term (by which we mean staying invested for at least 5 years). The investment team look to achieve this through managing a portfolio of investments and generating income through a natural income approach.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Natural income

So, what exactly is ‘natural income’? It’s simply the income paid out to investors from the regular interest payments and dividends generated by the underlying investments held within the fund. The Premier Miton Cautious Monthly Income Fund is multi-asset fund, which means that the team strategically invests across different types of asset, such as company shares (equities), fixed income investments (such as bonds, which are types of investments that allow investors to loan money to governments and companies, usually in return for a regular fixed level of interest until the bond’s maturity date, plus the return of the original value of the bond at the maturity date. The price of bonds will vary, and the investment terms of bonds will also vary) and alternative assets (which are non-traditional types of assets, such as infrastructure and commodities for example). Investments in each of the different asset types are selected by our active management team for their income and capital growth potential. However, in certain market conditions, companies may reduce or even suspend paying income (or dividends) until conditions improve. This will impact the level of income distributed by the fund which can fluctuate. Therefore, the amount of income generated by the fund is not guaranteed.

Unlike the encashment approach, where investors have to sell units to generate an income, our focus is on generating income naturally from these sources, meaning you don’t need to sell your units to receive your regular payments. Your initial pot of units remains intact, ready to continue providing an income for as long as you need it. Whilst the number of units you own does not change, the amount of income that the fund pays out, and the value of those units, will go up and down.

This approach can offer significant advantages. You maintain access to your investment should you need to, or if you are hoping to pass this on to your loved ones in the future. Of course, you need to remember that the value of your investment will fluctuate and depending on when you come to sell your investment, there is the risk that you get back less than originally invested. If your income needs change, you have the flexibility to reinvest the income and potentially benefit from further investment growth. It is important to remember that with any type of investment, there are risks. The amount of income generated is not guaranteed and may not be sufficient to meet your income requirements, and there is a risk of loss to your original investment amount.

Investing isn’t for everyone and it’s important that you understand and are comfortable with the risks associated with investing in this type of fund. It’s really important to seek independent financial advice to check if an investment is suitable for you, based on your investment objectives, your attitude to risk and your individual personal circumstances.

Robust solution

We understand that the concept of ‘income’ funds can be confusing, and misconceptions abound. However, with people living longer and healthier lives, the need for a long-term income solution has never been greater. We believe the Premier Miton Cautious Monthly Income Fund can offer an income solution, by looking to provide a regular income stream for the long-term.

Find out more about how natural income works and explore how the Premier Miton Cautious Monthly Income Fund could help you achieve your long-term financial goals. Visit the fund page on the Premier Miton website for details, including information about the risks of investing and those risks specific to this fund.

CAPITAL AT RISK

This fund may experience high volatility due to the composition of the portfolio or the portfolio management techniques used.

This is a marketing communication.

Investors should refer to the fund Prospectus and to the Key Investor Information Document (KIID) before making any final investment decisions. A free, English language copy of the Prospectus, KIID and Supplementary Information Document are available on the Premier Miton website, www.premiermiton.com or copies can be requested by calling 0333 456 4560 or emailing [email protected].

Whilst every effort has been made to ensure the accuracy of the information provided, we regret that we cannot accept responsibility for any omissions or errors.

Any views and opinions expressed here are those of the author at the time of writing; they may not represent the views of Premier Miton and should not be taken as statements of fact, nor should they be relied upon for making investment decisions.

Premier Miton is unable to provide investment, tax or financial planning advice. We recommend that you discuss any investment decisions with a financial adviser.

Reference to any investment should not be considered advice or an investment recommendation.

This document and all of the information contained in it, including without limitation all text, data, graphs, charts, images (collectively, the “Information”) is the property of Premier Fund Managers Limited and/or Premier Portfolio Managers Limited (“Premier Miton”) or any third party involved in providing or compiling any Information (collectively, the “Data Providers”) and is provided for informational purposes only. The Information may not be modified, reverse-engineered, manipulated, reproduced or distributed in whole or in part without prior written permission from Premier Miton. All rights in the Information are reserved by Premier Miton and/or the Data Providers.

Marketing communication issued by Premier Portfolio Managers Limited, (registered in England no. 01235867), authorised and regulated by the Financial Conduct Authority, a member of the Premier Miton Investors marketing group and a subsidiary of Premier Miton Group plc (registered in England no. 06306664). Registered office: Eastgate Court, High Street, Guildford, Surrey GU1 3DE.