Aegon plans to offer lifestyle strategies that “cater for broadening choices available to retiring investors”, including a default fund that focuses on reducing risk via multi-asset investment.
The firm said the default multi-asset strategy reduces volatility as savers approach retirement, offering a better risk/return profile for those who opt for drawdown or change their retirement date.
Multi-asset will be used for Aegon’s default fund and will become the primary strategy within its range of default options.
It stated that lifestyle strategies, which were primarily designed for workplace default fund investors, have had an increased market presence in the wake of auto-enrolment.
Nick Dixon, investment director at Aegon, said that in the context of a 25-year gilt bull market and a prevalence of annuity income, the approach has served investors well.
He said: “However the market is rapidly changing and, as new retirement flexibilities raise the demand for drawdown solutions, Aegon believes the industry standard needs to fundamentally change to meet the needs of a ‘typical’ workplace saver.”
As a result, the provider is offering three types of lifestyle approaches - diversified risk-reduction, annuity target and cash.
The primary strategy used for the firm’s own default fund will be diversified risk reduction, which Aegon believes offers the best outcome for a ‘typical’ default investor.
Mr Dixon said: “Workplace customers who cannot afford advice, and struggle to make their own investment choices, need an investment approach that reduces risk while offering reasonable prospects for growth, even if they retire later than planned.
“Over time, annuity-targeting strategies will no longer reflect the behavior of most investors. Risk reduction using a diversified investment strategy tends to offer better returns for less risk, especially where investors delay or phase into retirement, and where they choose drawdown.”
ruth.gillbe@ft.com
