Your IndustryJul 1 2015

Guide to Target Date funds

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CPD
Approx.40min

    Guide to Target Date funds

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      CPD
      Approx.40min
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      Introduction

      By Emma Ann Hughes
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      First created in the 1990s there was more than $700bn (£457bn) invested in this type of fund in the US at the end of 2014, according to research from Morningstar.

      We are now starting to see the trend in this approach to accumulating cash for retirement take hold on this side of the Atlantic.

      Earlier this year, Paul Bucksey, head of UK defined contribution at Blackrock, said he expected the new pension freedom rules would be a catalyst for the growth of target date funds in the UK.

      In the last few months alone BlackRock and Zurich have launched target date funds.

      Target date funds are typically multi-asset funds, used mostly as the default by defined contribution arrangements.

      These funds, which are also called ‘lifecyle’ funds, are designed to meet the risk profiles of DC members as they move through their investing life from accumulation at younger ages to protection of the defined contribution pots as their retirement planning stage approaches.

      Advocates of this approach argue target date funds effectively make DC investment effortless for members.

      This guide will explore the regulation of DC pension fund management, how to decide if this default option is best for your clients and weighing up the alternatives to target date funds.

      Supporting material for this guide was produced by Steve Charlton, defined contribution proposition manager for Vanguard in Europe and Mark Fawcett, chief investment officer at Nest.

      In this guide

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