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(1) The current Asset Allocation for the FT
APCIMS Balanced Portfolio Index is 67.5% equities, 20%
UK Government Bonds, 7.5% Alternative Assets and 5% in
Cash (2) Average income on the FT APCIMS Balanced
Portfolio Index - the difference between the Total
Return Index and the Income Taken Index being 3.77%
over this period (3) As measure by the Retail Price
Index
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Evidence from Capita today suggests that UK dividends have
increased to a record level over the last quarter, rising by
6.6% excluding special dividends.This is all the more
remarkable, given the collapse of dividends from the banking
sector which, in December 2006 accounted for 18% of the FT
All Share and the suspension of payments from BP following
the oil spill in the gulf.This highlights the robust health
of the remaining large UK corporations and the role that they
can play in long term income planning for private investors,
particularly those who are planning to provide income in
retirement from a portfolio of investments.
Indeed, our own research shows that an investment of £100,000
in March 1993 in a balanced portfolio (as measured by the FT
APCIMS Balanced Portfolio Index (1)) and which had reinvested
the income as it arose, would have seen the value of the
portfolio rise to £379,606 by the end of March 2012.
Moreover, an investor who had chosen to spend the income as
it arose, would have seen their capital rise to £196,615 and,
as importantly, the value of the income rise from £4,100 to
£7,400(2).This is over a period where inflation (3) has risen
by 72.86%, the annualised equivalent of 2.92% and a period
during which global equity markets have been the most
challenging since the 1930s.
This ability of a well balanced portfolio of investments to
provide growth in both capital and income above inflation
over the longer term should make it a key component of longer
term savings for investors which, I would suggest, is vital
at a time when increasing longevity and falling state
provision makes an individual's personal financial planning
key to their long term financial wellbeing.
Rob Burgeman
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