What is the difference between accumulation and income share classes?

Q: I'm considering switching some funds from accumulation (ACC) to income (INC) to provide cash for pension payments. However, when I look at the growth graphs on the website, both funds are the same. I was expecting the INC to be lower than the ACC due to distributions. Can you please explain?

A: Your question relates to the fact that many funds allow investors to either hold accumulation (ACC) or income (INC) units.

If you hold the income version of a fund, distributions will automatically be paid out into a nominated bank account. These payments typically relate to dividends from the fund’s underlying equity holdings, or the interest (or coupons) paid on corporate bonds.

On most equity funds, these distributions are typically made quarterly, although some income-focused bond funds may make these payments on a monthly basis. (With a few funds making distributions on a six-month or annual basis.)

Many people, like yourself, switch from accumulation to income units as they move into retirement and use these payments to supplement pension income, or bridge a period between stopping work and drawing the state pension. 

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However, when reviewing fund performance, most fund platforms do not differentiate between these different versions of the same fund, and just show the total return — which assumes income has been reinvested. This explains why you can’t see any distinction between the ACC and INC versions.

If you want to get a clearer picture of what the growth has been without this income being reinvested, you can check the fund price (NAV) history for the INC units on the online fund factsheet. This will show the drop in price when income is paid out — known as the ex-dividend date. If you compare this to the ACC version, you will see the difference in growth over time, as well as getting an idea of the cash paid out.

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When it comes to tax considerations, if you are switching share class within the same fund — for example, from ACC to INC units — this won’t trigger a capital gains tax (CGT) charge as it is not treated as a disposal for CGT purposes. It’s also worth pointing out that any fund switches made within an ISA or SIPP are not liable for CGT.

However, income drawn from a SIPP or General Investment Account could also be subject to income tax, depending on your other income for the year. No income tax will be charged on withdrawals made from an ISA. 

6 August 2025: The article was updated to clarify that switches between different share classes within the same fund are not treated as a disposal for CGT.

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Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Direct shareholdings should generally form part of a well-diversified portfolio of other investments. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.