Recommend an income fund or bond please
Discussion
My wife is an executor for her late father.
The will requests that a trust is setup (with all of the assets from his estate).
This trust should have investments that produce an income. The income is to be given to his surviving partner, with the capital remaining and to be left to his children, after his partners death.
I use VHYL as part of my investments, but would ask for recommendations for other income producing finds or bonds to best fulfil this bequest?
There will be approx 300k to invest, his widow is 80 and we are looking to maximise her income, but protect the capital for his children.
His children will inherit the estate after the death of his partner.
I have looked briefly at income producing funds (there are many!), but would appreciate all of your thoughts.
I was thinking of
1- A small amount in bank savings, to act as a buffer for monthly payments to his partner
2 - the rest invested in low cost, income funds, or perhaps income bonds, if the rate is high enough?
I assume (will check / research further) that the trust will be registered with HMRC and submit annual returns to pay any taxes due. The trust will then transfer monies monthly to his partner net of tax.
Any suggestions for suitable income funds?
The will requests that a trust is setup (with all of the assets from his estate).
This trust should have investments that produce an income. The income is to be given to his surviving partner, with the capital remaining and to be left to his children, after his partners death.
I use VHYL as part of my investments, but would ask for recommendations for other income producing finds or bonds to best fulfil this bequest?
There will be approx 300k to invest, his widow is 80 and we are looking to maximise her income, but protect the capital for his children.
His children will inherit the estate after the death of his partner.
I have looked briefly at income producing funds (there are many!), but would appreciate all of your thoughts.
I was thinking of
1- A small amount in bank savings, to act as a buffer for monthly payments to his partner
2 - the rest invested in low cost, income funds, or perhaps income bonds, if the rate is high enough?
I assume (will check / research further) that the trust will be registered with HMRC and submit annual returns to pay any taxes due. The trust will then transfer monies monthly to his partner net of tax.
Any suggestions for suitable income funds?
98elise said:
How about...
UBS Global Enhanced Income Sustainable. Historic Yield is 9%
Shroder High Yield Oportunities. Yield is 8%
I don't have any particular insight other than I've recenty moved some cash into them rather than be all in on normal funds.
Hate to say it, but yields that high really don't feel sustainable. Looking at https://www.hl.co.uk/funds/fund-discounts,-prices-... with chart type set to price rather than total return rather confirms my feeling.UBS Global Enhanced Income Sustainable. Historic Yield is 9%
Shroder High Yield Oportunities. Yield is 8%
I don't have any particular insight other than I've recenty moved some cash into them rather than be all in on normal funds.
I appreciate it isn't an option for the OP, but I'd rather own VWRL and sell units - the actual overall outcome seems far better.
https://webfund6.financialexpress.net/clients/Harg...
Red is Enhanced income sustainable, Blue is VWRL
There are various equity income funds, and a lot do completely different things
- Some are massively reaching for yield, but total return of those is generally poor and volatility can be higher if investing in cyclical stocks
- Some are focussed on dividend growth (i.e. higher quality companies who may have lower initial starting yields but with scope to grow their dividends).
- Some are focussed on super high quality dividend paying companies which "should" be less volatile/more defensive
- Some have a mandate that covers all of the above and allows them to go where the best opportunities are
Fairly interesting spread of options in IA Global Equity Income given it's only got 50 odd funds in the sector...
If it were me personally I'd be exploring which of these options best suit, and perhaps combining with some form of multi asset income offerings to give the bond (and alternative asset) type exposure.
- Some are massively reaching for yield, but total return of those is generally poor and volatility can be higher if investing in cyclical stocks
- Some are focussed on dividend growth (i.e. higher quality companies who may have lower initial starting yields but with scope to grow their dividends).
- Some are focussed on super high quality dividend paying companies which "should" be less volatile/more defensive
- Some have a mandate that covers all of the above and allows them to go where the best opportunities are
Fairly interesting spread of options in IA Global Equity Income given it's only got 50 odd funds in the sector...
If it were me personally I'd be exploring which of these options best suit, and perhaps combining with some form of multi asset income offerings to give the bond (and alternative asset) type exposure.
xeny said:
98elise said:
How about...
UBS Global Enhanced Income Sustainable. Historic Yield is 9%
Shroder High Yield Oportunities. Yield is 8%
I don't have any particular insight other than I've recenty moved some cash into them rather than be all in on normal funds.
Hate to say it, but yields that high really don't feel sustainable. Looking at https://www.hl.co.uk/funds/fund-discounts,-prices-... with chart type set to price rather than total return rather confirms my feeling.UBS Global Enhanced Income Sustainable. Historic Yield is 9%
Shroder High Yield Oportunities. Yield is 8%
I don't have any particular insight other than I've recenty moved some cash into them rather than be all in on normal funds.
I appreciate it isn't an option for the OP, but I'd rather own VWRL and sell units - the actual overall outcome seems far better.
https://webfund6.financialexpress.net/clients/Harg...
Red is Enhanced income sustainable, Blue is VWRL
If any of his assets are already in a tax wrapper like an ISA then I'm guessing you need to see if you can transfer his ISA, or his ISA allowance, to his wife (assuming you can do this - which I think there is something similar?) to save on tax.
Something like this might be worth a read and consideration https://www.ii.co.uk/analysis-commentary/bond-watc...
Another option - open one of the lowest cost platforms and park 100k for example in a distributing money market fund, and the remainder in either a bond ladder or gilt/bond funds and also hope for some capital appreciation if/when interest rates decline.
I don't think I'd touch equity at 80yrs old *
Something like this might be worth a read and consideration https://www.ii.co.uk/analysis-commentary/bond-watc...
Another option - open one of the lowest cost platforms and park 100k for example in a distributing money market fund, and the remainder in either a bond ladder or gilt/bond funds and also hope for some capital appreciation if/when interest rates decline.
I don't think I'd touch equity at 80yrs old *
- eta: regarding not touching equity - lots more to consider like the health of his wife, and what amount of income is initially required from the 300k. If she doesn't need all the income from the 300k (circa 12-15k should be easily achieved) then yes, consider putting an amount into a low-cost index to 'grow' the equity for her children. A FTSE index like the FTSE100 can produce not-too-shabby yield.
Edited by Phooey on Friday 29th March 08:47
xeny said:
98elise said:
You might be right. I'm just dipping my toe in high yields at the moment. If they don't sustain those returns I'll probably move back out.
I think they may well return 8-9%, it's just the capital figure they are returning 8-9% of could gently decrease.UBS has actually grown by 2% in the few months I've had it, which is more than the yield.
98elise said:
That doesn't seem to be the case from the charts.
UBS has actually grown by 2% in the few months I've had it, which is more than the yield.
We may be looking at charts differently then.UBS has actually grown by 2% in the few months I've had it, which is more than the yield.
I'm looking at https://www.hl.co.uk/funds/fund-discounts,-prices-... and clicking on Price rather than leaving the default Total Return selected. That shows down 25% in 5 years.
Jimmying the graph out to 10 years at https://webfund6.financialexpress.net/clients/Harg... (you open a HL graph in a new tab and change the span figure in the URL to 120 Months rather than 60) shows a pretty steady drop, and that is before thinking about the impact of inflation on the value of the price IYSWIM.
xeny said:
98elise said:
That doesn't seem to be the case from the charts.
UBS has actually grown by 2% in the few months I've had it, which is more than the yield.
We may be looking at charts differently then.UBS has actually grown by 2% in the few months I've had it, which is more than the yield.
I'm looking at https://www.hl.co.uk/funds/fund-discounts,-prices-... and clicking on Price rather than leaving the default Total Return selected. That shows down 25% in 5 years.
Jimmying the graph out to 10 years at https://webfund6.financialexpress.net/clients/Harg... (you open a HL graph in a new tab and change the span figure in the URL to 120 Months rather than 60) shows a pretty steady drop, and that is before thinking about the impact of inflation on the value of the price IYSWIM.
Most of my investments are in normal funds so dividend isn't really a big factor. If the capital starts to reduce I'll sell.
Edited by 98elise on Friday 29th March 13:47
It's why there tend to be dedicated "equity income" funds.
Broadly speaking companies that throw off lots of dividends tend to either grow slower or maybe don't grow at all but just sit there throwing off dividends.
If you listen to someone like Terry Smith he'll tell you all day long to invest for total return and take income by selling units when you need it.
Pensioners and people who like seeing a reasonably steady "income" appear each month may see it differently
Edit to change "invest for growth" to "invest for total return"
Broadly speaking companies that throw off lots of dividends tend to either grow slower or maybe don't grow at all but just sit there throwing off dividends.
If you listen to someone like Terry Smith he'll tell you all day long to invest for total return and take income by selling units when you need it.
Pensioners and people who like seeing a reasonably steady "income" appear each month may see it differently
Edit to change "invest for growth" to "invest for total return"
Edited by b
hstewie on Friday 29th March 12:14
hstewie on Friday 29th March 12:14Phooey said:
If any of his assets are already in a tax wrapper like an ISA then I'm guessing you need to see if you can transfer his ISA, or his ISA allowance, to his wife (assuming you can do this - which I think there is something similar?) to save on tax.
If the money is going into a Trust then the Trust can't hold ISAsI didn't think ISAs could be transferred at all - but a quick Google suggests then can go to spouse.
xeny said:
I think that may be only upon death - i.e. if you die your ISA assets are inherited by your spouse with the tax wrapper intact?
Well, yes but that's what the thread is about. My (brief) reading is they can only transferred within the existing provider - but I asumme they're transportable once that's happened.Gassing Station | Finance | Top of Page | What's New | My Stuff