@Chloe, I’ll re-phrase a question previously asked: how would your mother feel if her investments fell by 10%, or 20%, or 30% and she then needed to sell some of them to deliver her income? This is the potential dilemma with selling capital to generate an income rather than just taking the dividends. What if the initial capital doesn’t grow over the next three years, but falls in value instead? A few charts, all showing returns with the dividends re-invested over 2 1/2 or 3 year periods:
Now go and look at the dividends that were paid out by these trusts over the same periods. You will see that the levels of the dividends have been far more stable and reliable than the levels of the share prices. And it’s more likely that share prices will drop than for dividends to be cut, especially with investment trusts.
As @PaulS has pointed out, the suggested ITs and their allocations were examples of how the required level of income could be achieved. You should also look at the assumptions that I said that I’d made with those suggestions: “I’ve assumed that…volitility in the value of assets is acceptable…it will not be necessary to generate income by selling down capital.”
However, selling down capital is what you are proposing to do. With this requirement then the suggested investment trusts aren’t necessarily the best options - they’re certainly not ones that I would have suggested. Also, re-investing dividends has associated costs: the broker charge, and stamp duty for some of those ITs.
Selling incurs further costs: another broker charge, and a depreciation due to buying at offer prices and selling a bid prices (although this cost is hard to determine once prises have changed). Re-investing dividends and selling once a year to take out the income will reduce the level of income by the total amount of those charges. Much better, in my view, to take the dividends when they are due and to re-invest income that is surplus to requirements once a year or so.
If your mother does decide to invest a higher amount of her initial capital then she could increase allocations to the same ITs, or do as PaulS suggests and look at ones that have more of a capital growth focus and less emphasis on growing their dividends. But as @Mousy and @Buck have pointer out, such an approach isn’t necessary in this case and does carry a higher risk of decreasing the capital.
Your mother has sufficient capital to be able to generate all of her income requirement in the form of dividends; not everyone is that fortunate. I take the view that if dividends do deliver the required income then they should be taken. This takes away the risk of being forced to sell at depressed prices. Instead, sales of capital can occasionally be done to cover one-off larger expenditures, e.g. buying a new car, redecorating, etc. A strategy that relies on having to sell capital requires a more active approach to which funds are held, and when they are held, and when they are sold completely and replaced with another. Much simpler just to take the dividends.