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Equity income investment trusts show strong growth

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Research into the performance of UK equity income-focused investment trusts shows that annual income has grown by an average of 5% per year for more than 20 years, 2% ahead of inflation.

The figures from the Association of Investment Companies show £100,000 invested into the average UK Equity Income investment company on 1 September 1994 would have generated an initial annual income of £3,265 by 31 August 1995. By 31 August 2014, this annual income would have grown to £8,139. In addition, the capital value of the investment would have more than doubled to £222,315 – a 122% increase, again well ahead of inflation.

Ian Sayers, Director General of the Association of Investment Companies (AIC) said: “Our recent pension research revealed that 59% of respondents expected to be retired for at least 20 years. When asked what might discourage them from buying an annuity, 72% cited the impact of inflation on a level annuity and 67% the inability to pass anything on to friends and family when they die. So we decided to see whether the popular UK Equity Income sector had managed to keep up with inflation over 20 years in both income and capital terms.

“Many people are aware of the advantages investment companies have over other funds in delivering a higher or growing income, such as the ability to hold back some of their income in good times to pay it out in more challenging ones. Today’s figures show that these are not theoretical advantages, with the sector increasing their annual dividends well ahead of inflation over 20 years, as well as more than doubling the capital value.

“Of course, this type of investment is very different to buying an annuity. There are no guarantees and you are putting both your income and capital at risk. But for those who can accept the risks, these figures make a compelling case for investment companies to be considered as part of a long-term income portfolio.”

Top UK Equity income investment trusts over five years:

The Investment Company
Lowland Investment Company
Finsbury Growth & Income Trust
Perpetual Income and Growth Investment Trust
Edinburgh Investment Tst
Invesco Income Growth Trust
Value & Income Trust
Temple Bar Investment Trust
The City of London Investment Trust
Shires Income

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