Pension investors are putting an increasing amount into their Sipps each year; here are some investment ideas.
The average amount of money invested in Sipps by customers of the Share Centre has increased by 75 per cent year-on-year, according to latest research from the broker.
For those who are looking to invest their pension savings through a Sipp, whether they are primarily focused on growth as their pension fund builds up, or they now want to draw an income, Money Observer’s 12 model portfolios offer a valuable route to suit different risk profiles.
Growth investors in the process of building up a Sipp portfolio might want to consider the Foxtrot portfolio, which aims for long-term growth at a higher risk level. The portfolio has returned 25.5 per cent over one year and 39.2 per cent over three years.
Those who are thinking about drawing an income from their portfolio could look at the ‘growing income’ portfolios, medium-risk India (up 16 per cent over one year and 39 per cent over three) and higher-risk Lima (up 22 per cent over one year and 43 per cent over three). Both are designed to provide an income stream that will increase over coming years – a valuable consideration in the face of rising inflation.
Also with an eye to an increasing income, Helal Miah, investment research analyst at The Share Centre, recommends City of London IT. The trust has one of the longest track records for continuous dividend growth, dating back 50 years; it is helped by one of the advantages that investment trusts have – the ability to use revenue reserves in difficult times.
‘The current yield is around 3.9 per cent and investors should appreciate that expectations for future dividend growth are for around 4 per cent to 5 per cent a year,’ he adds.
Another fund he mentions is the tracker SSGA SPDR S&P Global Dividend Aristocrats, which tracks high dividend yielding equities globally. ‘This fund could well be suitable for investors seeking a regular income as it pays out quarterly with an annual dividend yield of around 4 per cent.’
When it comes to individual stocks, he mentions the pharmaceutical company GlaxoSmithKline is one for pension investors to consider. ‘The group produces and develops vaccines, prescription and over the counter medicines, as well as health-related consumer products, and therefore has products that are unlikely to be going out of demand.’
He argues that its defensive characteristics, as well as a 4.8 per cent dividend yield, should also be attractive for longer-term investors.
Another company Miah mentions is the regulated power and gas distribution group National Grid. ‘We have long been fans of the group for income seekers, and the improving progress as well as the benefits it is getting from the weakness in sterling only strengthens this support.’
He says the company that has been a consistent dividend payer, with an attractive dividend yield of around 4.5 per cent. ‘Furthermore, the dividend is due to grow at least in line with inflation.’
Keep up to date with all the latest personal finance news and investment tips by signing up to our newsletter. Email subscribers will also receive a free print copy of Money Observer magazine.