Vanguard Target Retirement

sebthered

About to invest my maturing cash ISA, and had planned on investing in a VLS 60 S&S ISA. Just reviewing performance etc and noticed their Vanguard Target Retirement funds, wondered if the asset mix/underlying funds is a better option...? thoughts and opinions gratefully received.

https://www.vanguard.co.uk/uk/portal/detail/mf/overview?portId=9668&assetCode=BALANCED##overview

ColdIron

The thing with these funds is they 'lifestyle' your investments from riskier to safer or less volatile ones as you approach your retirement date. This is to preserve your capital so you could purchase an annuity. Now with the pension freedoms lifestyling has become less popular and people will stay invested for longer. So these may or may not be appropriate for you depending upon your plans for when you retire

dunstonh

Vanguards timing of the launch of these target retirement funds was strange as it coincided with most providers pulling those due to the changes in the pension freedom options.


However, Vanguard don't fully disinvest like a traditional lifestyling option. If you are not buying an annuity or using 100% of the funds to spend on day 1 of your retirement, then these are unlikely to be a good idea.

principa

I think that the retirement funds are a good idea - as I see it they are a simple extension to VLS in that you start off young with a VLS80 and end up old with a VLS20.

ColdIron

principa wrote: »

start off young with a VLS80 and end up old with a VLS20.

If I was 65 with up to 30 years left in me, I wouldn't want to be 80% bonds/fixed income unless I had an expected expenditure such as a annuity or mortgage repayment. I'd be looking to keep up with inflation and an increasing income

BLB53

I think these are a reasonable alternative to the Lifestrategy as they automatically reduce the % of equities over the period of savings which means you do not need to think about adjusting your allocations.

In the early years they are 80% equities and gradually reduce to 50:50 between 20 and 5 yrs to retirement and then reduce again to 30% equities by 10 yrs after the selected date.

Perfect 'fire n forget' for long term retirement savings.

Zola.

Can you get these through regular sites like H&L etc, or do you have to go through Vanguard directly?

dunstonh

principa wrote: »

I think that the retirement funds are a good idea - as I see it they are a simple extension to VLS in that you start off young with a VLS80 and end up old with a VLS20.

Not if you planning to be in drawdown in retirement. If it was an annuity or full withdrawal planned on that date, then absolutely right that risk reduction should take place. However, with drawdown, you are going to be invested for another 25-30 years.

principa

dunstonh wrote: »

Not if you planning to be in drawdown in retirement. If it was an annuity or full withdrawal planned on that date, then absolutely right that risk reduction should take place. However, with drawdown, you are going to be invested for another 25-30 years.

yes this is true - but there is nothing to stop you buying the retirement fund that hits the least risky level when you're 100 rather than 70.

BLB53

Not if you planning to be in drawdown in retirement

Cannot agree...50% equity allocation from age 65 is not unreasonable and 30% from age 75, again not unreasonable...not far off the allocations I am operating now with my Lifestrategy drawdown.

dunstonh

BLB53 wrote: »

Cannot agree...50% equity allocation from age 65 is not unreasonable and 30% from age 75, again not unreasonable...not far off the allocations I am operating now with my Lifestrategy drawdown.

Nor is 80% equity allocation at age 65 unreasonable.

What is reasonable is your risk profile and capacity for loss and whilst it is normal for people to drop a little down the risk profile in retirement, it tends to be a slower move and not as extreme.

Also, if you have invested for 20-30-40 years, you are likely to be very aware of markets and your knowledge is likely to somewhat compensate for some of the risk reduction.