Vanguard Life Strategy

bottleandahalf

Anybody started investing in the Vanguard Target Retirement funds?
Look like an even handier way of passive investing. They re balance automatically in line with your retirement date.
https://www.fundstrategy.co.uk/vanguard-launches-target-retirement-funds-to-uk-market/

dunstonh

Look like an even handier way of passive investing. They re balance automatically in line with your retirement date.

It was an interesting time to launch these as pension providers have been moving out of these types of funds because of fears of future mis-sale complaints. They are geared towards the annuity purchaser and not the drawdown method.

bottleandahalf

dunstonh wrote: »

It was an interesting time to launch these as pension providers have been moving out of these types of funds because of fears of future mis-sale complaints. They are geared towards the annuity purchaser and not the drawdown method.

Oh right, interesting. You don't recommend then?
Thought they would be suitable for a SIPP to drip feed into every month, with no need to re-balance every year/ few years.

dunstonh

Oh right, interesting. You don't recommend then?

used to use them a lot with inexperienced transactional investors (non-servicing). Never with servicing clients. We got a compliance briefing a couple of years back warning not to use them. Just in the last few weeks in the financial press, there has been coverage of providers mass moving people off lifestyle funds for that reason.

Thought they would be suitable for a SIPP to drip feed into every month, with no need to re-balance every year/ few years.

All multi-asset funds rebalance. However, these are lifestyle funds which auto-reduce risk as you get to a defined date/period. i.e. you end up more or less at cash at a given point. Ideal if you want to draw all the money out at that point or buy an annuity. No good if you want to use drawdown though.

bottleandahalf

dunstonh wrote: »

used to use them a lot with inexperienced transactional investors (non-servicing). Never with servicing clients. We got a compliance briefing a couple of years back warning not to use them. Just in the last few weeks in the financial press, there has been coverage of providers mass moving people off lifestyle funds for that reason.



All multi-asset funds rebalance. However, these are lifestyle funds which auto-reduce risk as you get to a defined date/period. i.e. you end up more or less at cash at a given point. Ideal if you want to draw all the money out at that point or buy an annuity. No good if you want to use drawdown though.

Re balance to reduce risk - that's what I was thinking. I was thinking it would be handy for the fund to do it automatically so as to stop tinkering with it Unwisely) too much when re-balancing it.

On the "end up at cash at a given point". When does this happen as I was looking at the 2015 fund and there is still around 45% equities in the fund?
Cheers.

dunstonh

The 2015 fund is for those retiring or wanting money out by 2020. You need to add 5 to the year. So 45% equity with 5 years to go is not bad for a medium/high risk approach.

Temrael

Pretty good article on Monevator this morning about the pros and cons of the Vanguard Target Retirement Date funds, see here.

dunstonh

Surprised monevator didnt mention the key risk that these are not geared for those that are likely to move into drawdown (rather than annuity purchase or full fund withdrawal which they are more suited to)

TheTracker

dunstonh wrote: »

Surprised monevator didnt mention the key risk that these are not geared for those that are likely to move into drawdown (rather than annuity purchase or full fund withdrawal which they are more suited to)

Can you explain further?

For the TR funds, I thought that the rebalancing and asset allocation didn't stop at the retirement year. So the portfolio would continue a glidepath. Nothing stopping you selling units at a SWR to fund retirement.

In the US Vanguard also have TR Income funds, not just Acc. I suspect that will come in the UK if successful. They also have Managed Payout vehicles that help engineer SWR income.

At least in the UK we have IFAs to help us make sense of it all.

But in short, I reckon its a bit of a false claim that this is a risk. The clue is in the name. This is a fund for folk targetting retirement more than those in or about to be in it.

TheTracker

bottleandahalf wrote: »

Oh right, interesting. You don't recommend then?
Thought they would be suitable for a SIPP to drip feed into every month, with no need to re-balance every year/ few years.

I don't mean this personally, but the state of the financial advice industry in the UK means that practitioners are insecure in providing financial advice that concludes with a sensible recommendation to a bulk of people aged say 25-55 that amounts to 'using tax efficient wrappers first, drip feed savings all your life into one single low fee fund which consists of a globally diverse range of funds that allocate your money to assets in ratios that reduce volatility and recognise the date you will eventually retire'.

This has come about for various reasons, for example the insurance/litigation burdens of a heavily regulated industry, and because UK investors still have a 'Star Fund Manager' fan club.

So instead we have a financial advice industry that concludes with advisors telling consumers 'using tax efficient wrappers first, drip feed savings all your life into the funds which I pick for you which consist of a globally diverse range of funds that allocate your money to assets in ratios that reduce volatility and recognise the date you will eventually retire', and give me 0.5% of it each year.