It will not be news for many trustees that finding income is a challenge. Structurally lower interest rates have created a long-term headwind, lowering the returns expected from bonds. Equity income had proved a useful alternative but suffered significantly during the pandemic as companies were forced to cut dividends in the face of uncertain earnings.
This might have been bad enough, but now income investors now face a new challenge – inflation. For some years inflation has been largely benign, operating at or near the Bank of England’s target rate of 2% 1. The only brief spike in the last three decades was as the world emerged from the global financial crisis in 2011.
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