A guide to investment for trustees 16 Trust investments Which investment vehicle? Where a beneficiary has a right to receive income only, in order to satisfy the main objective of the trust and to comply with the suitability requirement of the Trustee Act 2000, the trustees would need to invest in assets that produce income. It should be noted that withdrawals from investment bonds (even within the 5% allowance) do not count as income, as investment bonds are non-income producing assets. Even though the trustees’ main concern will be to ensure income is generated, they are obliged to consider the interests of all the beneficiaries. They will therefore need to ensure a balance between income-producing and capital-appreciating assets, not only for the income beneficiaries but also for those beneficiaries ultimately entitled to the capital. The trustees will need to decide the needs of the beneficiaries and the actual payments required. Where beneficiaries are able to receive income or capital, the trustees’ investment choice is naturally broader. For trustees, the combination of changes to capital gains tax and UK dividend taxation has increased the complexity and cost of administering a trust. The dividend changes also mean less income is available for distribution to beneficiaries. In addition, further tax changes are always likely. With factors like inflation, interest rate variations and equity yields to consider, trustees need to look increasingly to tax efficiency and reduced administration costs to optimise investment returns. Use of collectives (such as OEICs) and investment bonds are very popular routes for securing a professionally managed portfolio linked to stocks and shares in a practical, cost- effective and tax-efficient way but there are other options available.