Income vs Accumulation Funds - Should I be switching to Income?

fcandmp

In the many years planning for retirement and previously investing for growth and certainly not drawing income from the investments to benefit from compounding, I wonder how or if I should be restructuring for retirement?

As I am close to requiring an income in retirement from savings investments, is it the norm to switch out of accumulation funds into similar income generating varieties?

If so is this done gradually, e.g. As part of portfolio rebalancing, or just bite the bullet? Trading fees seem to be part of the equation, as if I stuck with accumulation funds I would have regular sell transaction fees, but is there anything else I should be considering?

Many thank for the forum's thoughts

le_loup

Most providers don't charge trading fees.
You could take lump sums from your acc funds as you need the money.
Most people needing income will have inc units.

dunstonh

is it the norm to switch out of accumulation funds into similar income generating varieties?

Depends on what investment strategy you plan to be using to provide your income. There are multiple methods.

If so is this done gradually, e.g. As part of portfolio rebalancing, or just bite the bullet?

Again, it depends on the strategy you use now and the one you will be using in retirement.

Trading fees seem to be part of the equation, as if I stuck with accumulation funds I would have regular sell transaction fees,

Most platforms do not charge trading fees on fund switches. If yours does then you should carry out a cost comparison to see if moving to another is a more viable option.

fcandmp

DUnstonh, many thanks and some further information to illustrate.

I am fortunate to have a backdrop of DB pensions, so my query concerns those funds that will be accessible via drawdown and ISA. DRawdown income will be balanced at the edge of higher rate band to avoid paying tax at 40%. The SIPP is currently cash heavy to tide me through until DB's start to pay in 2020/22 and SP in 2026.

I am currently using Interactive Investor, largely for reasons of flat-fee structure. The quarterly £20 fee gives me two inclusive trades per quarter with all others at £10 each.

THe ISA platform provides free switches, but levies and annual might fee.

EdSwippet

fcandmp wrote: »

As I am close to requiring an income in retirement from savings investments, is it the norm to switch out of accumulation funds into similar income generating varieties?

For clarity, do you mean switching from funds aiming for capital growth to funds aiming for income. Or do you mean switching from accumulation units in some fund or set of funds to income units of the same fund or set of funds?

fcandmp

HI Edswippet, I guess the answer could be a bit of both, as a number of the funds I currently hold aim for a mix of growth and income. There may need to be some judicious pruning of existing funds aimed predominantly at capital growth as my objectives are now changing as is my appetite for risk.

I am aiming for an income of 3-4% per annum.

Thks

greenglide

There are a number of Investment Trusts which aim to pay out an attractive income stream as dividends, these are ideal in cases like this.

Some of these pay over 5%.