Vanguard launches target retirement funds to UK market

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Vanguard has launched its target retirement funds in the UK, with the popular fund of funds products already available in the US market.

Vanguard’s target retirement fund range, launched today, includes nine funds made up of equity and bond index funds and exchange traded funds.

Investors pick the fund that best aligns with their expected retirement date, which automatically adjusts its portfolio mix based on the investor’s age, shifting towards an increasingly conservative position.

The funds can be included in a Sipp, Isa and the new Lifetime Isa from 2017.

Steve Charlton, retirement expert at Vanguard, says: “The UK retirement landscape is changing rapidly. Following pension freedom reforms in 2015, investors have more flexibility and choice but they also face even more decisions on how to save for retirement and how to spend or draw an income in retirement.”

Morningstar’s 2015 Global Asset Flows Report said target retirement funds had a substantial presence in the US, but were almost nonexistent in other regions. As of December 2015, Vanguard managed $358bn in US-based target-date assets.

Vanguard research showed that many investors did not have the time or interest to dedicate to retirement planning.

“We’ve created Vanguard’s target retirement fund range in the knowledge that not everyone will know whether they will take lump sums, a regular income or buy an annuity until they retire,” Charlton said. “These funds help people to save and invest for retirement regardless of how they choose to use the funds in retirement.”

Vanguard says the target retirement funds addresses many behavioural finance pitfalls such as trading too frequently, chasing returns and trying to time the market, instead focusing on asset allocation, diversification, transparency and balance between risk, return and cost.