UK inflation is creeping back up again. As measured by the consumer price index, or CPI, the rise in the cost of living was 3.6% in June 2025, up from 3.4% in May, and rising at its fastest rate since January 2024. Prices are almost 28% higher than they were five years ago, according to ONS (Office of National Statistics) data.

Over the past five years, CPI growth has averaged about 4% per year, based on our own simple calculations.

This may not seem like a big deal when compared to double-digit hikes of recent years. Between September 2022 and March 2023, the UK experienced seven months of double-digit inflation, peaking at 11.1% in October 2022, sparking a nationwide cost-of-living crisis for millions as the economy reopened after the pandemic shutdown.

Even so, 3.6% is still way above the Bank of England’s 2% target and towards the top end of ranges Brits have become used to over the past 30-odd years.

This creates a unique set of challenges for investors. Rising inflation means most things cost more, and the knock-on effect of that is your savings and investments won’t buy as much in the future unless the returns you get from them keeps pace with, or outstrips, higher inflation.

That could be the interest rate on your savings, or capital performance and dividend increases from investment trusts in your portfolio.

In short, investors have to net a total return (capital gains plus any income) of at least 3.6% to avoid the real value of their portfolio from eroding.

For those investors reliant on income from their portfolio, faster inflation growth can put a big dent in your real wealth, income and buying power in the future.

One way to offset higher inflation is to look for investment trusts where dividend growth has outstripped inflation in recent years.

The table shows investment companies with an income objective which have grown their dividends faster than the CPI over the past five years.

An additional check is to look for trusts offering forward income yields above the five-year inflation average.

The caveat with forward yields is they are based on forecasts, and expectations do get missed sometimes, although trusts have the unique ability to maintain income levels in lean years by raising their capital reserves, a route many took to great effect during the worst-hit Covid years.

Shares has picked through the data and come up with three trust options we believe offer investors potential inflation-busting income returns in the years ahead.

If all goes to plan, these trusts should provide the reliability investors seek regardless of short-term spells of increased inflation to deliver real-terms income growth.

JPMORGAN CLAVERHOUSE INVESTMENT TRUST (JCH) 787p

Market cap: £435 million

Discount to NAV: -5.8%

Investors looking to inflation-proof portfolios should look no further than JPMorgan Claverhouse (JCH), the UK Equity Income stalwart trading at a near-6% discount to NAV (net asset value) and offering a plump 4.5% dividend yield.

The £435 million-cap trust boasts a 52-year track record of uninterrupted dividend growth and has upped the shareholder reward by an annualised 5.9% over the past decade.

While the bulk of the portfolio is in the FTSE 100, through the likes of Shell (SHEL), HSBC (HSBA), AstraZeneca (AZN) and Unilever (ULVR), this quality-infused fund’s managers have increased the focus on sustainable dividend growers across the market cap spectrum which should underpin steadily rising payouts over time.

JPMorgan Claverhouse backs high-quality, resilient companies which can invest capital at high returns to drive strong and sustainable earnings growth.

Relatively new portfolio additions include consulting and administration play XPS Pensions (XPS) and promotional merchandise supplier 4imprint (FOUR), while a holding in FTSE 250 construction group Morgan Sindall (MGNS) has helped recent returns.

The trust’s board seeks to increase the total dividend each year at or close to the rate of inflation. For calendar year 2024, dividends totalled 35.4p, up 2.6% year-on-year, slightly higher than prevailing inflation and supported by the trust’s revenue reserves. [JC]

CUSTODIAN PROPERTY INCOME REIT (CREI) 80p

Market cap: £370 million

Discount to NAV: -19.6%

REITs, or real estate investment trusts, have long been popular with investors seeking a regular source of income as they distribute most of their earnings in dividends and payouts are usually quarterly, which helps with financial planning.

Diversified commercial real estate trust Custodian Property Income REIT (CREI) has a strong focus on income, as its name suggests, and invests in smaller lot-sized properties leased to high-quality institutional and household-name tenants.

For the year to the end of March 2025, rents grew 2.3% on a like-for-like basis, but those which came up for review were renewed with a 29% uplift, which demonstrates the potential for further increases in income and dividends.

In addition, the manager has sold non-core assets at a substantial premium to their net asset value highlighting the potential for re-rating of its portfolio.

One thing to be aware of is the feast and famine nature of dividend growth, where asset realisations, or lack of them, can lead to bumper income growth some years, and limited increases in others. [IC]

NEXTENERGY SOLAR (NESF) 75p

Market cap: £433 million

Discount to NAV: -21%

The NextEnergy Solar Fund (NESF) is the flagship product of NextEnergy Capital, one of the world’s largest specialist solar investors, managing $3.9 billion worldwide.

The FTSE 250 constituent was listed on the London stock exchange in 2014 making it one of the oldest listed renewable companies in the UK.

The fund provides an attractive dividend yield for income seekers (currently 11%) and offers a natural hedge against inflation with roughly half its revenues backed by inflation-linked government subsidies.

NextEnergy has demonstrated a strong track record of dividend growth annualising at 4.2% per year over the last five and 4.8% per year over the last decade.

Sustainability of the dividend is important for income investors, and it is therefore comforting that NextEnergy has met its target dividend for 11 straight years.

On 16 June it declared a target dividend for the year to the end of March 2026 of 8.43p per share, up 1% and forecast to be covered within a range of 1.1 times to 1.3-times by earnings per share.

The business is highly diversified with 101 operating assets which generated 830GWh (gigawatt hours) of total electricity generation in the year to March 2025, enough to power around 265,000 homes. 

The company is currently advancing a pipeline of UK solar, international solar, battery storage and co-investment opportunities to complement the portfolio and further diversify. [MG]

Disclaimer: The editor (Ian Conway) owns shares in NextEnergy Solar Fund.

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