Target Date Funds are a relatively new concept for those operating in the pensions market, and for its adherents seem like a no-brainer.
Instead of offering the saver a host of funds to choose from, letting them make a decision they often feel ill-equipped to make, all the investor has to do is pick a date for when they want the money.
Indeed, the goal does not even need to be a retirement pot. Many in the US use Target Date Funds for saving for all sorts of long-term projects, like university fees, for example.
The principles remain the same: in the early years the investor is allocated into riskier assets, during the growth phase, and these are consolidated into less risky assets as the saver approaches retirement.
The savings journey is known as the glidepath and the decision to allocate to certain asset classes using multi-asset principles is taken by the fund manager.
The most important aspect from a saver’s point of view is when he or she wants to retire, and this is the target date, often marketed in blocks of three or blocks of five, so there might be on offer a 2020 cohort or 2030 cohort.
Critics say that lumps people altogether but adherents say that it helps in the current style of pension saving when people do not know exactly when they will retire.
Contributors to this guide are: Will Allport, senior retirement strategist at Vanguard; Emma Douglas, head of DC at LGIM; Brian Henderson, director of consulting at Mercer; Henry Cobbe, director of Elston Consulting; Craig Harrison, managing director of Creative Wealth Management; Paul Todd, director of investment development and delivery at Nest; Laith Khalaf , senior analyst at Hargreaves Lansdown.
Melanie Tringham is deputy features editor of FTAdviser and Financial Adviser