Vanguard Target Retirement 2055 Fund

Zola.

Linton wrote: »

No concerns, it's just totally pointless. If you want a second fund, invest in something that isnt well covered by VLS80.

Since you appear to have so long to go until retirement I cant see why you should want a targetted fund. Eventually if you choose to drawdown rather than buy an annuity you probably wouldn't want to seriously de-risk at retirement date. Or you may want to retire early. So I suggest you keep in VLS80 or VLS100 and reconsider in 25 years time.

Its for my partner, who has no real interest in playing about with it. The auto re-balancing etc may be something that will work well for her as a set and forget. I have my own pernsion sorted with work also.

We will continue to keep the monthly contributions to LS80 for a few decades all being well!

I am the one who invests in my own ISA and plays around with various other funds. She has no interest in that side really.

ColdIron

The model of substantially de-risking into fixed interest as you approach 65 to purchase an annuity is an old one now with the new pension freedoms. An annuity may not suit you and you could have another 25 years left in you by then, not to mention early retirement. I also don't think it's realistic to make plans for concrete funds in 25 (or 40 given the target date of that fund) years time. VLS may not even exist in the form we know it now and there are likely to be better offerings by then that address issues we don't yet have today. Do you still have any financial products you purchased back in 1992 when John Major was elected?

dunstonh

ColdIron wrote: »

The model of substantially de-risking into fixed interest as you approach 65 to purchase an annuity is an old one now with the new pension freedoms. An annuity may not suit you and you could have another 25 years left in you by then, not to mention early retirement. I also don't think it's realistic to make plans for concrete funds in 25 (or 40 given the target date of that fund) years time. VLS may not even exist in the form we know it now and there are likely to be better offerings by then that address issues we don't yet have today. Do you still have any financial products you purchased back in 1992 when John Major was elected?

This is noticeable as the pension providers have been pulling their lifestyling funds and IFAs have been given warnings that using lifestyling funds could end up being classed as mis-sales (if recommended post 2015). Vanguard launched these funds just as the others were pulling them.

Zola.

dunstonh wrote: »

This is noticeable as the pension providers have been pulling their lifestyling funds and IFAs have been given warnings that using lifestyling funds could end up being classed as mis-sales (if recommended post 2015). Vanguard launched these funds just as the others were pulling them.

Can you elaborate on what you mean please? I don't follow.

bostonerimus

For someone 30 years from retirement something like target retirement 2055 is just fine. As they get older they should look at their asset allocation and adjust it as required. Who knows what the equity and fixed income markets will look like in 2055....heck even annuities might be a good choice. There's no need to stick with just the Retirement Target allocation.

The Vanguard 2020 allocation of 57% equites and 43% bonds is in line with current ideas about the most "efficient" way to fund a 30 year retirement and I'd be perfectly happy retiring with something like VLS60 for drawdown. Bond prices might go down as interest rates go up, stock markets might fall; if you are invested in a DC pension you have to learn to live with uncertainty and risk and plan for a range of possibilities.

I an increasingly DC world people need to understand the relationship between risk and return and take control of their own finances. De-risking into bonds is pretty meaningless because the bond world is so diverse. One strategy is to hold high quality individual bonds to term so you get back the capital....in the US there are now target maturity bond funds that hold a range of bonds of the same maturity to avoid interest rate risk. They deposit the interest into a cash account and pay back principal when the fund matures. On a 2026 maturity fund you might get 3% and you capital back at the end.

dunstonh

Zola. wrote: »

Can you elaborate on what you mean please? I don't follow.

Lifetyling funds were something that were popular on pension funds as people would hit a specific date where their pension fund would be encashed to buy an annuity. i.e. there was a clear disinvestment date.

With the pension freedom options in 2015, annuity is now the minority option with drawdown now being the main option. This means you are likely to be invested for another 25-35 years after retiring. So, no need to de-risk any more.

Pension companies have either been closing their lifestyle funds or lifestyle options or writing to people recommending they be turned off/switched out of.

IFAs get compliance guidance and we have been told to not use lifestyling funds anymore unless it is expected to be highly likely that an annuity will be used. Otherwise you are leaving yourself open to investment complaints (as statistically, lifestyling results in lower returns in the majority of cases and unnecessarily using lifestyling would be considered bad advice).

BLB53

This is noticeable as the pension providers have been pulling their lifestyling funds and IFAs have been given warnings that using lifestyling funds could end up being classed as mis-sales (if recommended post 2015). Vanguard launched these funds just as the others were pulling them.

Not sure why you post this as Target Retirement funds are not 'lifestyling funds'.

badger09

BLB53 wrote: »

The main advantage is the gradual reduction in equities as you move closer to retirement so better for 'hands off' as you don't need to bother with asset allocation.

This is what I understand 'lifestyling' to mean

dunstonh wrote: »

This is noticeable as the pension providers have been pulling their lifestyling funds and IFAs have been given warnings that using lifestyling funds could end up being classed as mis-sales (if recommended post 2015). Vanguard launched these funds just as the others were pulling them.

BLB53 wrote: »

Not sure why you post this as Target Retirement funds are not 'lifestyling funds'.

So I don't understand your comment to Dunstonh:cool:

Zola.

dunstonh wrote: »

Lifetyling funds were something that were popular on pension funds as people would hit a specific date where their pension fund would be encashed to buy an annuity. i.e. there was a clear disinvestment date.

With the pension freedom options in 2015, annuity is now the minority option with drawdown now being the main option. This means you are likely to be invested for another 25-35 years after retiring. So, no need to de-risk any more.

Pension companies have either been closing their lifestyle funds or lifestyle options or writing to people recommending they be turned off/switched out of.

IFAs get compliance guidance and we have been told to not use lifestyling funds anymore unless it is expected to be highly likely that an annuity will be used. Otherwise you are leaving yourself open to investment complaints (as statistically, lifestyling results in lower returns in the majority of cases and unnecessarily using lifestyling would be considered bad advice).

Thanks very much for the detailed reply, that is food for thought!

Now that you mention it, I actually got a letter from my work's pension provider (Scottish Widows), to say my pension was originally set for annuity, but will be auto switched to drawdown as that seems to be the preferred way now.

What would you recommend my partner does? Perhaps start her own S&S ISA and setup a direct debit into a widely diversified fund like Vanguard LS 100? She has a basic pension already through her work (Aviva Pension - Diversified Assets Fund II S6), but at present is paying in 6%. Her work pays a measly 1%. Or is the sensible (and more obvious) option just getting her to put more into her work based pension? I am leaning on her having her own S&S ISA running on the side, as its another horse in the race.

dunstonh

BLB53 wrote: »

Not sure why you post this as Target Retirement funds are not 'lifestyling funds'.

As mentioned higher up, these are lifestyling funds. Lots of resources on google but here is the pension advisory service:
https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/choosing-investment-funds/lifestyling

The Vanguard funds de-risk as they get closer to the target date. However, they do not go fully to cash. From an adviser point of view, they run the risk of mis-sale accusations because they start at 80% equity allocation and finish at 30% equity allocation. That is a considerable move around the risk profile that is not typical of the average UK consumer and does not fit with most spending habits. Most may drop a notch on the risk scale but 80% to 30% equity is a lot more than a notch.

It also starts to derisk very early (in their 40s). This money is likely to be invested for another 40 or more years. So, why derisk in your 40s? This means the investment returns are likely to be lower from your 40s onwards.

What would you recommend my partner does? Perhaps start her own S&S ISA and setup a direct debit into a widely diversified fund like Vanguard LS 100? She has a basic pension already through her work (Aviva Pension - Diversified Assets Fund II S6), but at present is paying in 6%. Her work pays a measly 1%. Or is the sensible (and more obvious) option just getting her to put more into her work based pension? I am leaning on her having her own S&S ISA running on the side, as its another horse in the race.

Vanguard is popular on the DIY side. Platform technology/software is more advanced than most workplace pensions. However, many workplace pensions are very cheap and have suitable investments that can get close enough or even better than VLS. So, if the workplace pension can do the job fine, then use that for the pension need. If it cant, then there is no harm having a second individual scheme (or S&S ISA if that is better)