Dividend-paying UK shares have been a popular investment for UK savers.

But today, only a handful of companies are responsible for the majority of dividends in the UK market and with many cutting their dividends during 2020, this approach to investing for income looks much less attractive than it once did.

This paper explores how this trend has created a dilemma for investors and and identifies some alternative asset classes that they could consider investing in. Fundamental shifts in pension saving have also taken place in the UK over recent years, with a move from Defined Benefit funds to Defined Contribution, where the responsibility is on individuals to make asset allocation choices. As more and more DC savers reach retirement, we believe there will be huge additional demand for income-paying investments over coming years, as those who have accumulated pension savings draw on these in retirement.

Key findings include:

• Individual investors could learn from the asset classes used by large institutional investors. This includes infrastructure, global high-yield, and private credit.
• With c£260bn+ of UK pension assets entering decumulation in the next decade, demand for income generating assets and strategies is likely to increase.
• How regulators and investment bodies should work together to streamline and improve classification of investment vehicles to deliver these strategies