Income smoothing: what it means for you
When you invest in the AJ Bell Income or AJ Bell Income & Growth funds, you’ll receive regular income payments. To make those payments more predictable and easier to plan around, we use a process called income smoothing.
What is income smoothing?
Income smoothing is designed to give you a more consistent level of income throughout the year.
Investments held within funds don’t generate income evenly every month. Some months naturally produce more income than others.
Instead of passing these ups and downs directly on to you, income smoothing helps reduce large swings in your monthly payments where possible.
Why are payments made monthly?
We pay income monthly, rather than quarterly or yearly, to help you manage your personal finances and cash flow more easily.
Rather than paying out exactly what the fund receives each month, we carefully manage the amount paid so that monthly income is more predictable, while still reflecting the income the fund earns overall.
Why does the final payment look different?
The accounting year for funds ends in March. As funds can’t carry income over from one accounting year to the next, you’ll get a ‘balancing payment’ as the final payment of the year.
This payment covers any leftover income, so it may be higher or lower than previous payments, depending on how much income the fund has already paid during the year.
The month following the ‘balancing payment’ you may receive a smaller payment, as the fund hasn’t generated enough income yet to meet the ‘smoothed’ amount. This should then go back to usual after that.
This is a normal and expected part of how income smoothing works.
Income payments over the last year for the AJ Bell Income funds
When will payments reach your account?
Income payments are:
- Declared at the start of each month
- Processed and paid into your account at the end of the month
So, for example, the final ‘balancing payment’ for the accounting year (ending in March) will be paid into your account at the end of April.
Has the funds' goal changed?
No. While we’ve adjusted how income is paid, the funds’ main income goal remains to deliver an income yield of 3-5% over a rolling three year period.
Income smoothing doesn’t change how much income the fund aims to generate overall – it simply helps make payments more consistent and easier to plan for.
Disclaimer: The AJ Bell funds aren't a personal recommendation. We don't give investment advice, so you should talk to a (suitably qualified) financial adviser if you're not sure where to invest. Past performance is not a guide to future performance and some investments need to be held for the long term.