At less than £9,000 a year, the current State Pension is only designed to provide a token level of income for retirees. With this being the case, if you want to retire in comfort, it’s sensible to set up your own private pension to beat the government’s offering.
Here are two investment trusts that could help you build your nest egg. They will also produce a growing, passive income stream in retirement.
City of London Investment Trust
The City of London Investment Trust (LSE: CTY) is as close to investment trust royalty as you can get, growing investors wealth since 1891. City of London is one of the best income investment trusts around. The portfolio is made up of FTSE 100 companies and management is focused on providing long-term growth in income and capital.
These objectives make the trust an excellent pick for investors who want to protect and grow their capital over the long term. Over the past 10 years, the trust has returned 177%, outperforming its benchmark by around 45%. It has achieved this by investing in high-quality FTSE 100 income stocks.
City of London smashed its benchmark over the past decade without charging its investors the earth. The current ongoing annual management fee is just 0.39%, while most UK equity income funds charge around 1% per annum. The stock currently supports a dividend yield of 4.3%. It’s trading at a slight premium to net asset value of 1.5%.
Henderson Far East Income Ltd
City of London is focused on finding high-quality income stocks in the FTSE 100. Meanwhile, Henderson Far East Income (LSE: HFEL) as its name suggests, looks for income overseas. The primary advantage the company has over its domestic-focused peers is its broad mandate.
It can invest anywhere across the Asia-Pacific region, giving the trust a vast pond to fish for income stocks. As such, it should come as no surprise the stock offers a higher dividend yield than most companies in the UK.
At the time of writing, the annual dividend yield is 6.2%. The trust is also trading at a slight premium to the net asset value. The premium sits at 1.9%, which is around the 12-month average. So, it’s clear investors have always been willing to pay a premium to get their hands on the trust’s attractive income stream.
The most substantial holdings in the portfolio include Korean infrastructure group Macquarie Korea Infrastructure, Chinese liquor company Kweichow Moutai Co Ltd, which is one of the oldest businesses in the world. And finally, China Yangtze Power Co Ltd.
As well as Chinese stocks, the trust also has extensive exposure to Australia, Singapore, Hong Kong and New Zealand. This gives it a diversified portfolio that should continue to produce a steady yield for investors for many decades to come.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.