Which funds will pay you the best income?

AN ISA is not just about putting away some spare cash for a rainy day — thousands of older savers rely on the payouts from these accounts for their retirement income. And the new £20,000 allowance means you can shield even more of your savings income from the taxman. It’s vital to find a manager who will ensure you get solid regular payouts from your nest egg.

But for many savers it’s also important that the manager grows the pot over time. That means your income rises, too, keeping pace with the rising cost of living.

However, it’s not easy to spot a fund manager who can give you bumper returns and a good income.

Last month, Neil Woodford, one of Britain’s most successful fund managers, launched a fund he thinks will provide the answer.

His new CF Woodford Income Focus fund is aiming to give savers an income of 5p for every £1 they invest by the end of 2018.

That would give you an income of £1,000 a year if you invested your entire £20,000 Isa allowance in the new fund.

Mr Woodford also has a very good track record of growing savers’ money in his other fund, CF Woodford Equity Income, despite performing poorly compared to some income funds last year.

Since his fund launched nearly three years ago, he has outperformed his rivals and turned £20,000 into an impressive £26,979.

However, there is no guarantee his new fund will provide the 5p income or the top returns he is hoping for, despite his track record.

Experts say you shouldn’t pile all of your money into Mr Woodford’s fund and should also consider using other fund managers.

Laith Khalaf, of broker Hargreaves Lansdown, says: ‘You don’t want to put all of your eggs in one basket.

‘Neil Woodford is a good manager, but you should never place all of your money with one manager.

‘You want to spread your cash over maybe four or five funds in case one of them doesn’t perform as hoped.’

Mr Khalaf tips Marlborough Multi Cap Income, which he predicts could give you 4.4p income for every £1 you invest.

Its manager, Siddarth Chand Lall, has managed to turn £20,000 into £37,719 over the past five years by investing in a variety of small and large UK businesses.

One of his biggest holdings is WHSmith, the 225-year- old iconic British bookseller, which recently signed a deal to allow video game retailer Game to host concessions stands in its stores.

Another good option for savers, says Ben Yearsley, of adviser Shore Financial Planning, is JO Hambro UK Equity Income, which is currently paying 4.3p for every £1 you invest.

The fund’s manager, Clive Beagles, likes big dividend payers such as the oil giant BP, Vodafone and Barclays Bank.

He has turned £20,000 into £35,940 over the past five years.

‘Clive has always stated that he wants to grow the income the fund produces by at least 5 pc each year,’ says Mr Yearsley. ‘He’s outperformed that in recent years.

‘But it’s not only that: he also has a long track record of producing good returns. I’ve had money in this fund for some time.’

Jason Hollands, of fund broker Tilney, says that there is no need for savers to rush into Mr Woodford’s new fund.

He recommends Schroder UK Alpha Income, which is managed by Matt Hudson, who is currently providing 4.5p of income for every £1 invested.

He has also managed to turn £20,000 into £32,620 over the past five years.

Nearly £5 in every £100 of money in his fund is invested in Diageo, the UK drinks firm that is the world’s largest producer of spirits.

Diageo, which makes the iconic brands Johnnie Walker whisky and Guinness, has just rolled out a vegan-friendly version of its Baileys liqueur in the U.S.

Mr Hollands also tips Fidelity Money Builder Dividend, whose manager Michael Clark has turned £20,000 into £33,600 over the past five years.

Mr Clark is paying savers an income of 4.2p for every £1 they invest.

One of his biggest investments is Unilever, the Anglo-Dutch makers of Hellmann’s mayonnaise, Marmite and Persil laundry detergent, which accounts for £3.30 of every £100 of the fund’s cash.

In February, the consumer goods giant fought off a £115 billion takeover by U.S. rival Kraft Heinz, which makes Philadelphia cheese and juice drink Capri Sun. p.thomas@dailymail.co.uk