Royal London UK Equity Income (Class M) Accumulation | Hargreaves Lansdown (2024)

FAQs

What is the difference between income and accumulation in equity fund? ›

An income unit will distribute any interest or dividend income from the fund directly to you. As a result, you may receive an income from your investment at regular intervals. An accumulation unit is designed to offer you growth in the fund, so any income will be reinvested, raising the value of your investment.

Most aim to generate a rising income, and increase the value of your original investment over the long term. Most funds in this sector aim to generate a rising income, as well as increase the value of your original investment over the long term.

With income units, income is paid out to fund holders as cash. This could provide the investor with an income stream or the cash could be reinvested to buy additional units. With accumulation units income is retained within the fund and reinvested, increasing the price of the units.

If you hold your shares in an HL account, you will not have a share certificate. Your shares are held safely on your behalf by Hargreaves Lansdown Nominees Limited. However, if this is not the case and your certificates have been lost or stolen the Registrar can arrange for a duplicate certificate to be issued.

Income reinvested in accumulation units is known as a 'notional distribution', and is taxable in exactly the same way as the income from income units. One important thing to consider is that income automatically reinvested in accumulations units isn't liable for capital gain tax (CGT).

You can switch the type of fund after you've chosen one. For example, if you're invested in an accumulation fund and want regular payments to supplement your retirement, you can switch to an income fund. You may be charged a fee, so it's a good idea to check beforehand.

The benefits of equity income funds

This means that they are less exposed to the risks of holding individual stocks. Given dividend-paying stocks tend to be quality, well-established businesses, they are usually less volatile than the wider equity market.

Return on equity (ROE) is a measure of a company's profitability against its equity, expressed as a percentage. In other words, it is how much income the company is generating relative to the amount of capital received from shareholder investments. Think of it as the return a company is getting on its assets.

Accumulation funds don't distribute dividends or interest to shareholders. Rather, when payments are received by the fund, they reinvest it into more assets.

What is an example of accumulated income? ›

Example of Accumulated Income

To its investors, it paid stock dividends totaling $300,000. The new retained earnings balance, or the accumulated income at the end of the current year, is $450,000 ($250,000 beginning balance + $500,000 net income - $300,000 dividends paid out).

Based on its 5 year performance,Vanguard S&P 500 UCITS ETF (USD) Accumulating (VUAG) is the best performing Vanguard ETF right now.

As your money is held by the bank or building society who provides the product, it will not be affected if we go out of business and will still be covered by the FSCS. But it may take longer to get back than if it was saved directly with the bank or building society.

Our expert insight and research helps you make the right decisions. Manage your investments with our award-winning app and stockbroking services. Track your readiness for retirement using our expert-written guides and tools.

Is Hargreaves Lansdown any good? Hargreaves Lansdown is a great option for both new and sophisticated investors. Its aim is to simplify investments for anyone, and the company was among the first to offer DIY investments to Britons without the need for a financial adviser.

The difference is in how they handle the income (i.e. the dividends or interest) generated by the fund. For income units, this income is paid into your account directly, as cash. For accumulation units, this income isn't paid out to you directly, but reinvested into the fund itself.

Funds can be accumulation or income. With income units any income generated within the fund is distributed to investors. With accumulation units any income is retained within the fund, increasing the value of the units.

An accumulating ETF directly reinvests the dividends into the fund for you. This means that the value of an accumulating ETF will increase faster than its distributing counterpart. So even though you don't get a dividend payout in cash, you still benefit from the dividends.

Accumulation funds pay dividends, but they are not distributed. Instead, the funds are reinvested into the fund, which helps compound returns over time. This is the main difference between accumulating versus distributing ETFs. Learn more about dividend investing.