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Vanguard launches low-cost Target Retirement Fund range

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Vanguard has launched a range of low-cost, broadly diversified single-fund solutions to help investors reach their retirement goals. 

The new suite of professionally managed Target Retirement Funds (TRFs) invests in Vanguard’s low-cost, high-quality equity and bond index funds and Exchange Traded Funds. 

They help investors take control of their retirement savings by simply choosing one of Vanguard’s nine TRFs based on their expected retirement date. The TRF automatically adapts the asset mix for the different stages of the investor’s journey to and through retirement1 (See notes to editors).

TRFs are likely to appeal to a broad range of investors and can be included in a Self-Invested Personal Pension (SIPP), Individual Savings Account (ISA) and the new Lifetime ISA from 2017. In the US, TRFs have become increasingly popular among individual investors and retirement plan participants.

Steve Charlton, retirement expert at Vanguard, says: “The UK retirement landscape is changing rapidly. Following pension freedom reforms in 2015, investors have more flexibility and choice but they also face even more decisions on how to save for retirement and how to spend or draw an income in retirement. We’ve created Vanguard's Target Retirement Fund range in the knowledge that not everyone will know whether they will take lump sums, a regular income or buy an annuity until they retire. These funds help people to save and invest for retirement regardless of how they choose to use the funds in retirement.

“The new TRFs represent Vanguard’s Principles for Investment Success which encourage investors to focus on factors within their control to achieve long-term results. The principles guide investors to set clear investment goals, minimise costs, develop a suitable asset allocation using broadly diversified funds, and maintain perspective and long-term discipline.”

A year on from pension freedom reforms in 2015 and changes to the annual and lifetime allowances, investors now have the option of saving for retirement via a workplace pension, a SIPP, an ISA or the new Lifetime ISA as announced in the March 2016 Budget. However, Vanguard research shows many investors lack time for or interest in retirement planning. Vanguard’s TRFs help to address these challenges by offering a straight-forward fund solution based on investment best practices and managed by experienced investment professionals.

Best practices include the principles of asset allocation, diversification, transparency and balance between risk, return and cost, which help savers avoid the common behavioural finance pitfalls such as trading too frequently, chasing returns and trying to time the market.

Vanguard is one of the largest providers of TRFs in the US and manages US$358 billion in US-based target-date assets as at the end of December 2015.

Investors can buy the new TRFs through platforms including Ascentric, Raymond James, Novia, Zurich, FNZ, Alliance Trust Savings, Hargreaves Lansdown, Fidelity Personal Investing and Aviva Investment Account.

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