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Average amount invested in pensions up 75% year-on-year

18th September 2017 Print

In light of Pensions Awareness Day Helal Miah, investment research analyst at The Share Centre, comments on options available to pension investors and provides some long term investment ideas:

“Savers who wish to build a bigger nest egg have a number of options. For those that want to combine the tax advantages of a pension while also being able to select their own investments, a Self-Invested Personal Pension, or ‘SIPP’, could be a suitable option.

“This type of pension account allows investors to take control of their retirement pot in order to help maximise returns and cut costs.

“Latest research from The Share Centre highlights that investors are clearly recognising the need and importance of investing for their retirement as the average amount of money its customers have invested in its SIPP product has increased by 75% year-on-year. This ethos is also reflected in the increased level of activity as the number of trades made within its SIPP has increased by almost a third (28%) whilst inflows into the pension product increased by a staggering 87% year-on-year*.

“A wide range of investments can be added to a SIPP, including individual company shares, unit trusts, investment trusts, exchange traded funds, gilts and corporate bonds, commercial property and cash. With such a big selection, choosing investments can be a daunting task.

“When considering investments for a pension, it is important to consider the time frame that you are investing over. Naturally, with this type of account, we can assume that most will be investing over the longer term. With this in mind, it is of my opinion that opting for investments that have attractive yields or track record of dividend growth could comfort longer term investors that they are getting value for money.

“From an equity point of view, there are a number of companies that I think fit perfectly into this bracket. As a starting point, research based pharmaceutical company GlaxoSmithKline is definitely one for 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. Its defensive characteristics as well as 4.8% dividend yield should also be attractive for longer-term investors.

“Another company worth considering is 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. Investors should appreciate that this is a company that has been a consistent dividend payer, with an attractive dividend yield of around 4.5%. Furthermore, the dividend is due to grow by at least in line with inflation.

“For investors wanting to branch out and away from individual equities, from individual equities, considering an investment trust like the City of London Investment Trust could be of use. The company’s objective is to provide long-term growth in income and capital, principally by investment in equities listed on the London Stock Exchange. City of London has one of the longest track records for continuous dividend growth, dating back fifty years, helped by one of the advantages that investment trusts have, of the ability to use revenue reserves in difficult times. The current yield is around 3.9% and investors should appreciate that expectations for future dividend growth are for around 4% to 5% a year. 

“Another alternative could be the SSGA SPDR S&P Global Dividend Aristocrats fund. 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%. The Dividend Aristocrats series of funds do not just focus on the highest dividend payers, there is a strong emphasis on a good track record of dividend payments and sustainability into the future, providing SIPP investors with the possible sustainable dividend payments they require.”