With the 5 April tax year end deadline now less than two weeks away, the time to use your all-important pension allowance is running out.
A pension, like the HL Self-Invested Personal Pension (SIPP), is one of the most tax-efficient ways to save and invest. You can get 20-45% tax relief (up to 48% for Scottish taxpayers) when you pay money in. And when you come to take it out, you can take up to 25% tax free with the rest taxed as income.
You also don’t have to pay UK income tax or capital gains tax on investments in a pension.
If you’re looking to use your SIPP allowance before 5 April, or even if you’ve already used your allowance and are looking for ideas for the new tax year, here are three pension fund ideas to consider.
This article isn’t personal advice. If you’re not sure if an investment’s right for you, ask for financial advice.
Tax and pension rules change, and any benefits will depend on individual circumstances. Remember, you'll usually need to be 55 (rising to 57 from 2028) before you can access money in your pension.
3 fund ideas for a Self-Invested Personal Pension
Investing in these funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.
For more details on each fund and its risks, use the links to their factsheets and key investor information.
Investments and any income from them can rise and fall in value, so you could get back less than you invest. Yields are variable and past performance isn’t a guide to the future
All three of the funds below take charges from capital which can increase the yield, but reduces the potential for capital growth.
Ninety One Diversified Income
If you’re retired and looking for a lower-risk option which provides an income for your portfolio, you could consider an income-focused total return fund like the Ninety One Diversified Income fund.
Total return funds are more conservative than funds that invest fully in company shares and aim to shelter your money when stock markets fall. This could be valuable if you’ve reached retirement and are worried about seeing the value of your investments decline.
The Ninety One Diversified Income fund focuses on providing income mainly through investing in bonds, with a smaller part of the fund invested in shares.
The fund invests in emerging market bonds, high-yield bonds and derivatives, all of which add risk.
At the end of February the fund was yielding 5.02%.
Annual percentage growth
29/02/2020 to 28/02/2021 | 28/02/2021 to 28/02/2022 | 28/02/2022 to 28/02/2023 | 28/02/2023 to 29/02/2024 | 29/02/2024 to 28/02/2025 | |
|---|---|---|---|---|---|
Ninety One Diversified Income | 5.87% | -1.53% | -2.21% | 4.44% | 6.17% |
IA Mixed Investment 0-35% Shares | 3.33% | 0.10% | -5.77% | 4.10% | 6.79% |
Artemis Income
If you’re prepared to accept a little more volatility in the capital value of your investment, you could consider an equity income strategy. Here the income is generated from dividends paid by company shares.
Equity income strategies give the possibility for some capital growth as well as income. Most also aim to grow their dividends over time. This can be useful in retirement as it can help your income keep up with rising prices, at least to some extent.
The Artemis Income fund is an example of an equity income strategy that invests in UK companies. The managers buy shares in companies they think can pay a stable and resilient income over the long run, with the potential to grow their dividends.
The fund’s managed by an experienced trio, including one of the UK’s most-experienced income investors, Adrian Frost.
The fund is currently yielding 3.54%.
Annual percentage growth
29/02/2020 to 28/02/2021 | 28/02/2021 to 28/02/2022 | 28/02/2022 to 28/02/2023 | 28/02/2023 to 29/02/2024 | 29/02/2024 to 28/02/2025 | |
|---|---|---|---|---|---|
Artemis Income | 7.03% | 12.52% | 8.44% | 2.61% | 22.79% |
FTSE All-Share | 3.50% | 16.03% | 7.30% | 0.57% | 18.37% |
IA UK Equity Income | 3.27% | 13.42% | 6.84% | -1.14% | 14.87% |
Baillie Gifford Monthly Income
For those who don’t want to worry about switching between asset classes like shares or bonds, the Baillie Gifford Monthly Income fund could be a good middle option.
The fund invests across three broad investment areas – shares, real assets (like property) and bonds. It aims to increase the income by more than the increase in the consumer prices index (a measure of inflation) over the long term.
The fund focuses on providing a resilient income over time. It means that while the income might not be the highest available, it can be expected to be more consistent than some competitors.
The managers aim to invest fairly equally between the three categories of shares, real assets and bonds. This diversification helps the level of income to be more consistent over time. That said, it's expected the bonds will be the largest contributor to the fund's income. The shares could help to provide some capital growth.
At the end of February the fund was yielding 3.99%.
Annual percentage growth
29/02/2020 to 28/02/2021 | 28/02/2021 to 28/02/2022 | 28/02/2022 to 28/02/2023 | 28/02/2023 to 29/02/2024 | 29/02/2024 to 28/02/2025 | |
|---|---|---|---|---|---|
Baillie Gifford Monthly Income | 7.59% | 4.56% | -1.41% | 6.14% | 6.03% |
IA Mixed Investment 40-85% Shares | 10.65% | 4.30% | -1.13% | 6.26% | 9.81% |
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