Is the Vanguard Life Strategy fund suitable for a regular variable income stream?

smjxm09

I have investments in a Fidelity multi asset income fund which is a fund of funds.  It seems very similar to how the Vanguard Life Strategy fund works.  Would it be correct that I would buy units with each unit generating a variable income that I can set up to auto pay into my bank account paying the natural yield?    When I look at the Trustnet  reports are the graphs shown just based on the unit price or the unit price plus the income generated which can either buy more units or pay an income?

Alexland

On trustnet you will see the accumulation ACC units have a higher unit price than the income INC units because they don't pay income so the fund unit price grows faster. If you buy INC units of any fund then the dividends will be added back into your account cash balance. It depends which platform you are using on if they will have a feature to automatically withdraw that income from the platform account back into your bank account. However fund dividends can be a bit erratic depending on the performance of the underlying investments so if you want smoothed income you might want to consider a different structure such as an investment trust.

Linton

Are you talking about drawdown from a SIPP or from an S&S ISA/unsheltered account?    I use II who are able to pay out dividends/interest from an S&S ISA to an external bank account as and when it turns up.

But this would not work with a SIPP.  The problem is that SIPP drawdowns are taxed under PAYE with a monthly payroll run on a fixed date.  The provider needs to know in advance how much the drawdown is and the money needs to be available perhaps 2 weeks in advance.  Whether any SIPP provider can handle dividends in the way you want I dont know but I doubt it.  Neither of the ones I use for SIPPs, BestInvest and AJBell, can.  

Default performance graphs including those from Trustnet assume dividends are reinvested,  However with the Trustnet Tools/Charting facility you can change the "Chart Basis" to with or without reinvestment which will also be reflected in the  associated performance tables.

dunstonh

 Would it be correct that I would buy units with each unit generating a variable income that I can set up to auto pay into my bank account paying the natural yield? 

If you bought the income units and set the income to pay out rather than to reinvest then yes.

When I look at the Trustnet  reports are the graphs shown just based on the unit price or the unit price plus the income generated which can either buy more units or pay an income?

It depends on what options you select for the graph.  If you select acc units then there is no income distribution.  If you select income units then you get the choice of reinvestment or unit price only.

Natural income is not that common an investment and withdrawal strategy nowadays.   Total return with a cash float with natural income paid into the cash float is the main method we use.

Langtang

dunstonh said:

Natural income is not that common an investment and withdrawal strategy nowadays.   Total return with a cash float with natural income paid into the cash float is the main method we use.

Any chance you could explain that for me, or point me towards a link of some sort? 

Thanks in advance. 

smjxm09

The existing ISA’s are not part of a SIPP so I don’t need to drawdown an income.  It is just spare ISA money that pays an income that goes into my bank account for additional spending to add to my final salary pension.  

I just want something simple like the Fidelity multi asset income fund where I can switch online between monthly income or reinvestment and that I can basically forget about.   The Vanguard doesn’t look that simple and seems to be aimed at growing the pot or have I got it wrong?    I was looking at the Life Strategy 40 fund and would be happy with an income yield of around 3 to 4% while letting the unit price go up and down.  I feel that the unit price is irrelevant if I don’t intend to sell assuming it works like Fidelity.

 

AnotherJoe

Langtang said:

dunstonh said:

Natural income is not that common an investment and withdrawal strategy nowadays.   Total return with a cash float with natural income paid into the cash float is the main method we use.

Any chance you could explain that for me, or point me towards a link of some sort? 

Thanks in advance. 

Translation;

Rather than being solely concerned with what the dividend income alone is is, look at the total of dividends + growth to provide the income, and draw down from that (eg you may sometimes sell units to get more income, rather than solely dividend income)