Vanguard Life Strategy funds Versus Vanguard Target Retirement funds

IvanOpinion

On a related note, are these Target Retirement products really the way forward?  When I retire I would like to think that I will have 25-35 good years ahead of me - surely then it is worthwhile keeping a significant portion of my investments in equities.  If the target retirement funds start disinvesting 10 years before retirement then surely that is too early?  

grumiofoundation

IvanOpinion said:

On a related note, are these Target Retirement products really the way forward?  When I retire I would like to think that I will have 25-35 good years ahead of me - surely then it is worthwhile keeping a significant portion of my investments in equities.  If the target retirement funds start disinvesting 10 years before retirement then surely that is too early?  

If you wanted to use product but had this worry could always set “retirement age” later than will actually retire. 

Looks like latest retirement they currently offer is 2065. 

https://www.vanguardinvestor.co.uk/investing-explained/what-are-target-retirement-funds

Alexland

IvanOpinion said:

On a related note, are these Target Retirement products really the way forward?  When I retire I would like to think that I will have 25-35 good years ahead of me - surely then it is worthwhile keeping a significant portion of my investments in equities.  If the target retirement funds start disinvesting 10 years before retirement then surely that is too early?  

Yup if you are going into drawdown then you wouldn't want to be derisked as low as 50% equities at the point of retirement so VTR might be more suitable for those about to spend a lump sum, purchase an annuity or past times when bonds were still able to provide a good return.

If you are willing to be 'hands on' it would be preferable to run a 2 fund portfolio with an equities and bond fund where you can either gradually switch the units yourself to or direct future contributions to manage a more sensible ratio. However bonds are looking so unattractive it might be better to avoid derisking too much and just build up more in equities and use dividends and a healthy cash buffer to avoid drawing while markets are low.

AlanP_2

Target funds have not really caught on yet in this country but in America they are a much bigger business and if anyone is going to grow them here it will be Vanguard i would guess.So it may pay to search key words like target, pension funds,Vanguard etc but with America also in the search to get a bigger review sample on how they work (albeit in a different market the portfolio,fees etc will be different but not the idea behind it)

Target Retirement Funds (a Vanguard marketing name) may not have caught on in this country yet but the more generic name of lifestyling has been applied to many pension funds, by many providers for many years. 

Both do the same thing - reduce Risk On assets by buying Risk Off assets (normally Equities / Bonds but property, guaranteed return funds etc. may also be in the mix). 

If you must be in CASH or NEAR CASH on a certain date in the future, to buy an annuity for example or repay a mortgage, they are ideal. If you are going to remain invested for 20-40 years after that date, albeit at a lower volatility level possibly, what is the point of using them?

OP - I don't think I have seen you age on here on much about your circumstances. Why TR-2035? Are you retiring in 14 years?

firestone

Would tend to agree with the above but as a product they are designed for people like the OP who would probably not be able to decide when to change course or what allocation to pick.While it may not give the best result it might be better then an ad hoc stab in the dark in some cases
In a way i guess they could be considered as similar to old style pension funds  but with pre-set allocations & with lower fees.They are certainly more popular in America with a large number of people holding them but not sure if their quite the same but pretty sure when Vanguard launched then over here that they said the held Trillions in target funds?

AlanP_2

Must admit I have no idea whether there even are the likes of the traditional Aviva / Pru / Standard Life pension offerings available in the US so the Vanguard TR products may have been "novel" in their market.

I agree they are probably cheaper than the traditional insurer products and they are better than either Do Nothing or Dive In the Deep End and panic (sorry OP  )

firestone

AlanP_2 said:

Must admit I have no idea whether there even are the likes of the traditional Aviva / Pru / Standard Life pension offerings available in the US so the Vanguard TR products may have been "novel" in their market.

I agree they are probably cheaper than the traditional insurer products and they are better than either Do Nothing or Dive In the Deep End and panic (sorry OP  )

Made me want to have a quick read and it would seem the Trillions in American Target funds i mentioned was with regards all providers of which there seem more then over here.I wondered if they are the same as our traditional glide path pensions and they do seem similar & notice Vanguard even have a couple of their active funds in the US version at no extra cost so they could change the UK version maybe.
The OP did say he wants to beat inflation and looking back at the 2015 fund which is well past its target its 7.4% annulised over 5 years and 3.86% over the year (but obviously with no guarantee if the OP is reading )

singhini

Morning to all, and thanks for posting (some interesting points)
I'm 49 years old. have no mortgage and also no job (made redundant summer 2019). Have savings held as either as cash in the bank or in ISA's earning between 1.55% and 1.9% (both these cash ISA's will mature in June  and December this year). The only S&S isa i had was the Vanguard VLS60% which i opened in early 2018 with £20k (over the 2 years it grew by 22% then crashed due to Covid so i pulled my money out and now the £19,400 cash is still sat with Vanguard just not invested). Overall we are talking about £150,000 in all my savings. Guess the house is worth £320k currently.
My attitude to money is simple: its the 80/20 rule i.e. spend 20% and save 80% 
i also have company pension pots (6 in total with one of them being final salary. Total current value of all pots = £200,000 with the final salary pot representing 50% of that. Side note to myself: its only going to pay me £4,500 a year when i retire, which means ive got to live atleast 22 years when i retire aged 65 and i cant see that happening since my mum died aged 66, dad died at 67 and my sister died aged 45!). I'm just not going to live to 87 and thats a fact!
The 7th pension pot i have is a SIPP which currently has £50,000 cash in it (yes thats right i was putting money into it but have never actually invested it so its a £50,000 cash SIPP). 
Cash, cash, cash and more cash!!!!!!!!!!!! 
I need to make this money work for me as i dont have a job 
PS: No wife and no children (and there never will be coz im not stupid, they cost huge amounts of money).
SUMMARY
£320,000 house with no mortgage
£150,000 cash savings
£200,000 in various company pension pots
£50,0000 cash in a SIPP
Observation 
My cash ISA's earn around 1.55% to 1.90%
My S&S Isa in just 2 years returned 22%
That's why I'm getting interested in not holding cash anymore

Your thoughts are most welcome

Albermarle

i also have company pension pots (6 in total with one of them being final salary. Total current value of all pots = £200,000 with the final salary pot representing 50% of that. Side note to myself: its only going to pay me £4,500

Firstly a final salary does not have a pot . It gives you a promise to pay a guaranteed income from retiring to death, normally linked to inflation. As a secondary issue they offer you the possibility of a transfer value, if you give up the guaranteed income .

If they have offered you just £100K for giving up £4.5K that is a very poor offer , unless maybe the £4.5K is not inflation linked .

 year when i retire, which means ive got to live atleast 22 years when i retire aged 65

This calculation is only OK if the £4.5K is not inflation linked .

To give an example to buy an annuity of £4.5K inflation linked at 65 would cost around £200K 

AlanP_2

OK, where to start!

First, take out any notional value you place on your DB pension from your £200k pension pots and then add in the £50K SIPP. That is what you have in "investment" type pensions and is about £150k by the looks of it.

Your £4.5K DB at age 65 is the icing on the cake and whether you draw it for 22 years or not - who cares, you ceratinly won't.

SP of ~£9.5K plus DB of £4.5k will give you £14k a year of inflation linked, no worries / no effort income until the day you pass away whether that be in your 60s or in your 90s.

The next thing to consider is what are your life plans - Are you intending to get another job? How much income do you need now and will you need in retirement, and from what age?

Assuming you do get another job then retirement income question comes front and centre. Having a view on that will help to shape your investment choices for pensions, ISAs and cash pots.

You could, for example, combine all the pensions and invest your £150k in Target Ret 20xx or in VLS 40 or 60 or a combination. You could do the same in a S&S ISA, you could keep 3 months to 60 months required income in cash as a safety net. We can't tell you what to do at the end of the day but it seems to me at the moment you are drifting as you don't know what you are aiming for.