5 investment trusts for your pension
The size of the pension you retire on depends on the success of the investments you choose. Investment trusts are often a good choice for long term growth and income options, but which ones should you consider?
The investments in your pension can have a huge bearing on the size of the pot of money you’ll end up with in retirement.
Investment trusts, while traditionally have been overlooked, are increasing in popularity and are some of the top picks for DIY investors.
Investment trusts can help generate income, deliver strong dividends, as well as give you exposure to private companies.
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According to the Association of Investment Companies (AIC), an industry body that represents investment trusts, retail investors now own 26% of investment company shares, compared to 25% two years ago.
“Investment trusts are built for the long haul,” said Nadir Mirza of Tyndall Investment Management. “Pension capital demands patience, governance, and discipline – three qualities that sit at the core of well-run investment trusts.”
Investment trusts that focus on dividend-paying companies have always been a popular pick – and not just among income investors wanting a regular stream of income.
That income reinvested can be a significant boost for growth too. For example, in the UK reinvested dividends have made up around 67% of total returns over 20 years.
So when it comes to your self-invested personal pension (Sipp), which investment trusts should you add? Here’s what the experts say.
Investment trusts for your pension
1. JPMorgan Global Growth and Income (LON: JGGI)
If you are still building your pension – known as the accumulation stage - a global equity trust makes the most sense, says Emma Wall, chief investment strategist at Hargreaves Lansdown.
“The JPMorgan Global Growth and Income trust is a good option, managed by Helge Skibeli who has more than 30 years’ experience, supported by two other managers in London and New York supported by analysts across various continents to help spot the best opportunities across the globe.”
The team looks for companies with attractive valuations, that offer significant potential for growth and are unlikely to suffer big share price volatility. The top 10 holdings will be familiar to investors. Microsoft, Amazon, Nvidia, The Walt Disney Co and Johnson & Johnson are among the largest positions.
Wall adds: “We like it because it has a core approach – neither growth or value biased – and a robust dividend policy paying out quarterly, which can be reinvested for accumulation or take an income for those already in retirement.”
The trust has returned 62% over five years.
2. The Brunner Investment Trust (LON: BUT)
Pete Walls of Unicorn Asset Management favours trusts with greater geographical diversification and “a bit less of the Magnificent 7.”
“In the prevailing, highly concentrated, world market, I have reservations about the fact that many of the global trusts have such a large exposure to the USA,” he said.
“The Brunner Investment Trust styles itself as an ‘all weather’ global equity portfolio. It’s been around for almost 100 years so there’s a good chance it will continue to prosper for long-term pension investors.”
Some of the trust’s top 10 holdings include Microsoft, payments giant Visa, energy stock Totalenergies, chip-maker Taiwan Semiconductor Manufacturing and hotel group InterContinental Hotels.
“Despite having a lower weighting to the rampant US market than some of its peers, portfolio performance has been good,” added Walls.
While the dividend yield is a modest 1.7% it's dividend has increased year on year for the last 53 years. The trust has returned 73% over five years.
3. The Law Debenture Corporation (LON: LWDB)
Investors who believe in a prosperous future for the UK might consider The Law Debenture Corporation, a trust suggested by Walls and Mirza.
The trust balances income stability with long-term growth potential, with around 83% in UK stocks.
Mirza said: “For a pension investor, it’s a compelling combination: dependable income, valuation discipline and genuine flexibility, underpinned by a structure designed to compound quietly over time.”
Its top 10 holdings include banking stocks HSBC and Barclays, car manufacturer Rolls Royce and mining firm Rio Tinto.
It has returned an impressive 100% over five years.
Walls added: “It’s been listed on the London Stock Exchange for more than 135 years, so once again it’s likely to be around for some time to come.”
4. Nippon Active Value Fund (LON: NAVF)
This trust targets Japanese small and mid-cap companies trading below intrinsic value.
“The Nippon Active Value fund is a timely expression of Japan’s long-overdue revival,” said Mirza. “After years of corporate inertia, Japan is finally embracing reform – balance sheets are leaner, governance is improving, and management teams are starting to prioritise shareholder returns. The fund’s activist approach fits this environment perfectly.”
Mirza added: “This hands-on strategy has delivered strong NAV growth in a market that remains deeply under-owned by global investors. For pension investors, this is the kind of exposure that adds genuine diversification and long-term alpha potential – an active, conviction-led play on one of the few major markets still trading at a structural discount to its own potential.”
Top 10 holdings include medical supplies firm Hogy Medical, media company Fuji Media Holdings and environment product manufacturer Ebara Jitsugyo.
The trust has returned 117% over five years.
5. Augmentum Fintech (LON: AUGM)
Should you wish to invest in a specific theme, you could plump for one such as Augmentum Fintech, suggests Dan Boardman-Weston, chief executive of BRI Wealth Management.
“This is a trust that may be suitable for those with a high appetite for risk and a long-term time horizon. It focuses on potential high-growth private companies in the fintech space.”
Augmentum has benefited from being a former shareholder in Interactive Investor. Its top 10 holdings include Tide, which operates banking services for small businesses and online challenger bank Zopa.
Augmentum trades at nearly a 50% discount to the value of its assets. The fund has lost 34% over five years.
“Those with a good appetite for risk and appropriate time horizon should consider a small position as part of a diversified portfolio,” Boardman-Weston added.
How to choose an investment trust for your pension
If you’re considering an investment trust for your pension then there are several things to help with your decision on whether to invest.
“First decide how much risk you want to take, and where in the world you want to invest,” said Laith Khalaf, head of investment analysis at AJ Bell. “Then it’s a question of comparing investment strategies and manager track records, as well as considering costs.”
What a trust invests in is crucial. The top 10 holdings and percentage of the trust’s value held in each company is typically easy to find on a factsheet, which is a document provided by the investment company and refreshed regularly.
You can view them online directly from the fund management company or on an investment platform such as AJ Bell or Hargreaves Lansdown.
Understanding a trust’s strategy is important. “You’ll want to understand how the fund manager aims to deliver a strong return over time without taking too much risk in any one area,” said Nick Britton, research director of the AIC.
“It can be useful to look at the trust’s record – though it does not guarantee future returns – and how it has performed in various market conditions. Investment trusts can borrow to invest, which can boost long-term growth but also adds risk, so check the trust’s current level of borrowing - known as gearing - and borrowing policies so you know how much extra market exposure you may be taking on.”
“As you get closer to retirement, capital preservation may become more important to you. At this time, many people think about reducing their weighting to equities, and there are some trusts that aim to preserve wealth by spreading your investment over assets like equities, bonds, alternatives and cash.”
Since investment trusts typically trade at either a premium or discount to their net asset value (NAV), based on the balance of supply and demand, you should take a look at the discount or premium on the trust.
Khalaf added: “This shouldn’t be a major decision driver for long term investors, unless it’s deviated substantially from the norm.”
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Holly Thomas is a freelance financial journalist covering personal finance and investments.
She has written for a number of papers, including The Times, The Sunday Times and the Daily Mail.
Previously she worked as deputy personal finance editor at The Sunday Times, Money Editor at the Daily/Sunday Express and also at Financial Times Business.
She has won Investment Freelance Journalist of the Year at the Aegon Asset Management Media Awards in November 2021.