We use cookies to support features like login and allow trusted media partners to analyse aggregated site usage.
To dismiss this message and allow cookies to be used, please click "Continue".



Twitter board

Follow us
  • "To get to the heart of some of the issues surrounding responsible investment we brought trustees, fund managers an… https://t.co/ujIdYI4gKI9 hours ago
  • RT @TimGiles90: @TimManuel17 on Trustee awareness of #climatechange ft in @portfolio_inst latest #aonexpertsinthenews https://t.co/WJdMA3MD…yesterday
  • Beyond bonds: How pension schemes are looking to update their LDI strategies https://t.co/qcq3fx3dJJ #ldi… https://t.co/Aj4PVgTz0G2 days ago
  • Friday View: Climate change: a hot topic - TPR prepares for master trust deadline - Prudential and Aviva's de-risk… https://t.co/c8N8HZ62HE6 days ago
  • As offices and workplaces are heating up, so is the debate on climate change: What are trustees doing to protect sa… https://t.co/U77fvAzS199 days ago
  • Friday View: Infrastructure: Land of opportunity  - FTSE 100 schemes are back in black - Brewery hit by TPR fine -… https://t.co/disYRfYaUw13 days ago
  • With 70% of pension schemes planning to allocate to infrastructure - the scramble for assets begins. Our latest cov… https://t.co/aWetZeBhq216 days ago
  • Exclusive: Border to Coast appoints new CIO https://t.co/mipd2Aeyvy #LGPS #pensions #LPGSpooling https://t.co/P0D1EQLvmu20 days ago
  • Friday View: PPF's Ian Scott - Border to Coast goes live - TPR launches master trust consultation - Railpen invests… https://t.co/mSeDHNrEjP20 days ago
  • Local authority pension pool Border to Coast goes live with two equity funds, hires new CIO: https://t.co/4uIWEpuD1C https://t.co/8UP3stSh9o20 days ago
  • Our interview with the PPF's Ian Scott is now live! “The uniqueness of what we do here at the PPF is sometimes over… https://t.co/On1pYg5aXJ22 days ago
  • Latest buy-in means @UK_CAA has de-risked £1.7bn of pension scheme liabilities - https://t.co/eFRK22wyI2 #pensions https://t.co/rrYgf0fQAr24 days ago
  • Friday View: Border to Coast launches UK equity tender - Rentokil Trustee faces fine - Gleeson directors banned - P… https://t.co/wx2SJ0bGfG34 days ago
  • Shareholder engagement: It’s good to talk For responsible investors talk isn’t cheap. Not only does research sugges… https://t.co/imwrezJuKJ34 days ago
  • Friday View: PA's DB scheme signs buy-out deal - PIC invests in Midlands housing association - Newton Video on Emer… https://t.co/GbWDdyENlN41 days ago
  • RT @minerva_ESG: Hey, all #ESG and#corpgov tweeps, lend a hand to @portfolio_inst important opportunity to support investors' understanding…41 days ago
  • We want to know your appetite and understanding for ESG! Please click the link to take our 5 minute survey to tell… https://t.co/SsVgQzEKIc42 days ago
  • RT @AonRetirementUK: Great event, thanks for hosting @portfolio_inst. Inspired location too! https://t.co/we7Ou46ns342 days ago
  • Full house at our Portfolio Prepared event, Oliver Hamilton Illiquids specialist @AonRetirementUK discusses conside… https://t.co/F0qPFPjUSP43 days ago
  • West Midlland Pension Fund’s Jill Davys: “I am reluctant to overpay for assets” Assistant director of investments a… https://t.co/YHtEIU5BSN45 days ago


Set and forget

Set and forget

Mark Dunne
Tuesday 23rd January 2018

Target date funds are designed to take the stress out of retirement planning, but they have their critics. Stephanie Hawthorne examines the pros and cons.

“The TDF provider is unlikely to be the best-in-class manager for all asset classes and so investment performance may be inferior compared to a fund made up of the best-in-class managers.”

Niall Alexander, PSolve

The latest American import into the United Kingdom is not another fast food chain but an intriguing investment strategy. Target date funds (TDFs) have arrived to provide savers with an automated, age-based retirement plan.

The idea is that an individual in a defined contribution fund simply saves into a fund which targets a specific year for retirement, which is the target date. He or she can choose a target retirement date to aim for from a range of usually three or five year choices – commonly referred to as vintages.

Usually the system puts an individual’s savings in a combination of riskier assets, such as equities, when members are younger and lower risk assets like bonds and cash as they approach their selected retirement ‘target date’. In a TDF this is done within a single fund. So a member puts their money in and investment decisions are then made for them over the life of the fund. For example, if a member intends to retire in 2045, they would invest in the 2045 TDF fund.

Estimates vary about the number of UK pension schemes using TDFs, but Willis Towers Watson head of DC Investment Paul Herbert puts the number at between 5% and 10% of the market.

The main alternative to TDF is lifestyling, which has been used in the UK for the past 30 years, but Steve Charlton, SEI’s DC managing director for EMEA & Asia, expects TDFs’ popularity to increase.

Indeed, European DC Pensions, Evolution and Revolution, published by Spence Johnson Market Intelligence in 2016, estimates that current TDF usage in the UK totals £2.1bn or 3% of institutional default strategy assets. It predicts that this will increase to one quarter of UK default assets by 2025.

One of the largest pension schemes to use TDFs is NEST. Other master trusts using target date funds include Aon, Bluesky and TPT. Several investment managers offer TDFs in the UK including Alliance Bernstein, Blackrock, Legal & General, State Street and Vanguard.

Vanguard has just launched the Vanguard Target Retirement 2060 Fund and the Vanguard Target Retirement 2065 Fund in the UK. It is the largest manager of such plans in the US with $597bn of target date assets in the country by the end of October.

Page: 1 2 3

Leave your comment

View our comments policy

Please login or register with us to leave a comment. It's completely free!