The Search for Income

Find out what options are available for income investors

Income payments

When it comes to income investing demand is high and the options varied. Many people, particularly older investors and retirees may be looking for investment options that can yield an income, while the options range from structured products to global equity investments.

Cash solutions

If you are reluctant to put your capital at risk, a structured deposit plan may provide an option for an income investment. While the returns are generally not guaranteed with structured deposits, capital will be protected for the duration of the plan in a similar way to a cash savings account.

Plans provide the potential for a defined level of regular income.

The return of capital is dependent on the counterparty to the plan, normally a bank, being able to repay investors, with eligibility for the Financial Services Compensation Scheme also available.

Structured investments

This type of structured product can often provide the potential for higher levels of income, but capital in structured investments is at risk, linked to the performance of a market, such as the FTSE 100 Index.

What is called ‘soft protection’ may be available, where capital is only at risk if certain criteria are met. For example, if the FTSE 100 Index falls 50 per cent or more from its level at the start of the plan.

Income payments from structured products are often quarterly but may be monthly, or annually.

See the table below for examples of structured products:

Investing For Income

Product Name	Income Yield	More Info
FTSE 100 Enhanced Income Plan	4.20% fixed income	More Info >
TAX FREE FIXED INCOME: 5 year investment plan paying a fixed monthly income of 0.35% (equivalent to 4.20% annually). Available as a Stocks & Shares ISA, non-ISA investment and ISA transfer.		More Info >
FTSE 100 Defensive Income Plan	7.20% per annum	More Info >
A maximum 8 year investment plan paying a potential annual income of 7.20%. Also available for Stocks & Shares ISA and ISA transfer.		More Info >
FTSE Monthly Contingent Income Plan	6.00% per annum	More Info >
Maximum 10 year structured investment plan paying a potential monthly income of 0.50% (equivalent to 6.00% annually) and the opportunity to mature quarterly from year 2 onwards. Also available as a Stocks & Shares ISA investment and ISA transfer.		More Info >

Important Information: Structured investment plans are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. Income and growth returns are not guaranteed. There is a risk of losing some or all of your initial investment due to the performance of the underlying Index or commodity. There is also a risk that the company backing the plan known as the Counterparty may be unable to repay your initial investment and any returns stated.

Income funds

Income investment funds range from a lower risk fund investing in government bonds, through to strategic bond funds, which invest across a range of different government and corporate bonds, and equity funds.

Bond funds

While bond funds are seen as carrying less risk than equity funds, there is variation in how these funds invest. This type of asset is known as fixed interest because bonds are fixed-term, interest-paying assets; bond funds will hold these assets and collect the yield paid, as well as trading bonds after they have been issued on the open market.

Government bond funds are lower risk, while corporate bond funds may have the flexibility to hold bonds issued by companies with lower credit ratings but higher yields.

Strategic bond funds are likely to have the most diversified portfolio of bond holdings with government bonds and corporate bonds issued by various providers, some of which may have lower credit ratings and a greater risk of default.

Mixed asset funds

As with growth funds, there are investment funds available that invest in a wide portfolio of different assets, either directly or through other funds. This type of fund aims to return a regular income from different assets, while reducing exposure to one type of asset or market.

Equity funds

Funds investing in UK and global stocks and shares may aim to provide a regular income to investors. Funds may use active investment strategies to maximise income, as well as investing in company stocks and shares.

The focus of these funds may be companies that pay dividends – an income payment from a company to its shareholders.

Income payments on funds

Investment funds can pay a monthly income, but generally payments are made quarterly or twice a year.

See the table below for examples of income funds:

Income Funds - Select Range

Product Name	Income Yield	More Info
Henderson Strategic Bond	5.7%	More Info >
Income Paid Quarterly. Investing in higher yielding assets which will include most types of fixed interest securities, this fund aims to deliver a quarterly income to investors. See latest fund factsheet for details. Click here to view latest Fund Facts »		More Info >
Newton Asian Income	5.43%	More Info >
Income Paid Quarterly.The objective of the Sub-Fund is to achieve income together with long-term capital growth predominantly through investments in securities in Asia Pacific ex Japan (including Australia & New Zealand) region. The Sub-Fund may also invest in collective investment schemes. See latest fund factsheet for details.		More Info >
Newton Higher Income	5.4%	More Info >
Income Paid Quarterly. The objective of the Fund is to achieve increasing distributions on a calendar year basis with long term capital growth. The Fund may also invest in collective investment schemes. See latest fund factsheet for details. Click here to view latest Fund Facts »		More Info >
Invesco Perpetual Distribution	4.7%	More Info >
Income Paid Monthly. Invesco Perpetual Distribution offers a balance between both income and capital growth through investment in UK based equities and fixed interest securities. See latest fund factsheet for details. Click here to view latest Fund Facts »		More Info >
Invesco Perpetual Monthly Income Plus	4.46%	More Info >
Income Paid Monthly. Popular income fund that aims to achieve a high level of income whilst seeking to maximise total return through investing in high yielding corporate and Government bonds, together with UK equities. See latest fund factsheet for details. Click here to view latest Fund Facts »		More Info >
Woodford Equity Income Fund	3.50%	More Info >
Our selected partner for investing in Neil Woodford's Equity Income fund is Barclays Stockbrokers, via their INVESTMENT ISA for new ISAs and ISA transfers, or their MARKETMASTER® ACCOUNT for non-ISA investments. Income Paid Quarterly.The fund’s investment objective is to provide investors with long-term appreciation through investing in stocks primarily listed on the UK stock exchanges. Up to 20% may be invested in international companies. The income objective is 10% higher than the FTSE All Share Index yield with an anticipated annual yield of 4.0%.		More Info >
Newton Global Higher Income	4.7%	More Info >
Income Paid Quarterly. The objective of the Sub-Fund is to achieve increasing annual distributions together with long-term capital growth from investing predominantly in global securities. The Sub-Fund may also invest in collective investment schemes. See latest fund factsheet for details. Click here to view latest Fund Facts »		More Info >
Jupiter Merlin Income Portfolio	3.10%	More Info >
Income Paid Quarterly. To achieve a high and rising income with some potential for capital growth by investing predominantly in unit trusts, OEICs, Exchange Traded Funds and other collective investment schemes across several management groups. The underlying funds invest in equities, fixed interest stocks, commodities and property, principally in the UK. See latest fund factsheet for details. Click here to view latest Fund Facts »		More Info >
M&G; Global Dividend	3.27%	More Info >
Income Paid Quarterly. The Fund aims to deliver a dividend yield above the market average, by investing mainly in a range of global equities. The Fund aims to grow distributions over the long-term whilst also maximising total return (the combination of income and growth of capital). See latest fund factsheet for details.		More Info >
Kames Strategic Bond	2.95%	More Info >
The primary investment objective is to maximise total return (income plus capital ) by investing in global debt instruments,denominated in any currency, ranging from AAA Government Bonds through to high yield and emerging market corporate bonds. At least 50% of the fund will be invested in sterling and other currency denominated bonds hedged back to sterling. See latest fund factsheet for details. Click here to view latest Fund Facts »		More Info >
M&G; Optimal Income	2.44%	More Info >
Income Paid Twice Yearly.The fund aims to provide a total return to investors based on exposure to optimal income streams in investment markets. The fund invests across a broad range of fixed income assets according to where the fund manager identifies value. See latest fund factsheet for details. Click here to view latest Fund Facts »		More Info >

*Current Income Yields are Gross, Variable and Not Guaranteed
**Historic Yield reflects distributions declared over the past 12 months as a percentage of the mid-market price of the fund.
*** This is the target yield the fund aims to achieve per year, it is not guaranteed and could change according to prevailing market conditions. The target yield is net of basic rate tax.
Information correct as at 08/02/2012.

The value of investments and any return from them can fall as well as rise and you may not get back the full amount invested. Please ensure that you read the Important Risk Information below.

Important Risk Information:

This website contains information only and does not constitute advice or a personal recommendation in any way whatsoever. The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. The tax efficiency of ISAs is based on current tax law and there is no guarantee that tax rules will stay the same in the future.

Different types of investment carry different levels of risk and may not be suitable for all investors. Please ensure that you read the Important Risk Information for further details. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment and should read the product literature. If you are in any doubt as to the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.