We will all get to the stage when we want to stop working, living not from a salary but income generated by our investment portfolios. It’s one of those landmark moments in life; one you’ll probably have been thinking about long before you pull the trigger.
Transitioning a growth-oriented portfolio into one that provides steady income for retirement involves shifting from maximising capital appreciation to a strategy that prioritises income generation, risk reduction, and capital preservation.
You probably won’t make mass changes all at once, it’s usually sensible to do it gradually, over several months or even years.
Funds, stocks and bonds
This process often involves diversifying into dividend-paying stocks, bonds, and other income-producing assets while ensuring the portfolio keeps pace with inflation. More on the process later.
You may already own a selection of combined growth and income funds that provide a useful in-built balance between the two. But for those looking to start, or accelerate the process, Sharesify has pulled together a list of investment trusts that could help build out some of the funds part of the process.
Using AIC data, we looked for investment trusts offering an income yield comfortably above current UK inflation, that also have a track record for growing their shareholder dividend.
Staying ahead of inflation
UK inflation is running at around 3% in 2026. That said, oil price spikes caused by conflict in the Middle East have seen forecasts rise, with estimates averaging around 3.5% over the next few months. With that in mind, we looked for investment trusts with a 4%+ yield and 4%+ income growth track record (over five years).
This should give reasonable headroom to accommodate short-term inflationary fluctuations and is twice the Bank of England’s 2% average inflation target.
| Trust | Total assets | Yield | 5-year dividend growth average | Charges |
| JPMorgan Claverhouse | £533.43m | 4.20% | 4.18% | 0.62% |
| JPMorgan UK Small Cap Growth & Income | £474.68m | 4.98% | 22.29% | 0.76% |
| Aberdeen Asian Income Fund | £453.26m | 5.95% | 11.79% | 0.92% |
| BlackRock Frontiers | £436.90m | 4.11% | 7.17% | 1.42% |
| JPMorgan Asia Growth & Income | £364.18m | 4.83% | 8.36% | 0.82% |
| BlackRock Latin American | £150.37m | 4.76% | 4.18% | 1.36% |
| BlackRock American Income | £133.88m | 4.94% | 7.90% | 0.73% |
| Chelverton UK Dividend Trust | £30.77m | 7.52% | 6.25% | 2.79% |
Source: AIC
Simple step-by-step guide
Before making any changes to your portfolio, it’s sensible to consider a few things. Here’s a simple step-by-step model to turn your growth portfolio into a retirement-ready income one, based on guidance from the likes of Trustnet, Vanguard, Hargreaves Lansdown and others:
1. Assess your income needs and timeline
- Define income goals: Determine how much cash flow you need per month/year, considering your retirement lifestyle.
- Layered income approach: Create a strategy that combines income from dividends, interest from bonds, and partial sales of investments.
- Set aside cash reserves: Common advice is to keep 1–3 years’ worth of income in cash or cash equivalents (like high-yield savings) to avoid selling stocks during market downturns.
2. Shift assets from growth to income
- Use equity income funds/trusts: Specifically, the topic of this feature, start switching to funds/trusts that specifically aim for higher yields, such as equity income ones, to simplify the process.
- Consider quality dividend stocks: Focus on companies with a history of sustainable, reliable payouts rather than just high yields, which can be risky.
- Incorporate bonds: Utilise corporate and government bonds (such as gilts) for regular income payments and to lower overall portfolio volatility.
- Consider ‘alternatives’: Add exposure to property, infrastructure, or renewable energy investment trusts for diversification, which often provide inflation-linked payouts.
3. Restructure for income generation
- Switch to income fund units: If using investment funds, switch from ‘Accumulation’ (Acc) units, which reinvest dividends, to ‘Income’ (Inc) units, which pay cash out.
- Implement bond ladders: Purchase bonds with varying maturities (e.g. 2, 5, and 10 years) to create a steady stream of maturing cash.
4. Manage risks and taxes
- Do not go entirely risk-free: Keep a portion of your portfolio in equities, including growth shares, to ensure some of your money keeps growing to help keep pace with inflation, especially as retirements can last 20+ years.
- Diversify: Ensure you are not reliant on a single type of investment or sector.
- Minimize fees: High management charges significantly eat into your income, especially in lower-yield environments.
- Tax optimization: Structure your accounts to draw from taxable, tax-deferred, and tax-free sources at appropriate times.
5. Consider annuities
- Guaranteed income: Consider using a portion of your pension to buy an annuity to cover essential costs, providing peace of mind regardless of market volatility.
Disclaimer: Consult a professional financial advisor to create a plan tailored to your specific circumstances.
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