Vanguard launches two target retirement funds for younger investors

Victoria McKeever reports...

Vanguard has expanded its target retirement fund (TRF) range with the launch of two low-cost products for younger investors, aimed at those starting out in their career.

The Vanguard Target Retirement 2060 and Vanguard Target Retirement 2065 funds have an ongoing charges figure (OCF) of 0.24%. They form part of the asset manager’s range of 11 TRFs, which investors can choose from based on their expected retirement date.

These latest two TRFs are aimed at those entering the workforce, who do not expect to retire until 2060 or 2065. Young investors can see seemingly modest savings grow substantially over time in a low-cost investment, said Vanguard, as compounding takes effect.

It estimated an individual investing £100 per month, for example, could end up with around £135,000 after 40 years, taking into account the OCF and assuming a 5% growth rate, for a TRF held on Vanguard’s Personal Investor service.

Investors can access the funds online through Vanguard’s UK Personal Investor service, through other UK investment platforms or a financial adviser.

Vanguard senior investment planner James Norton said: “The UK public is facing an increasingly complicated route to retirement. Investors have more flexibility and choice, but they often face difficult decisions on how to save and invest in a rapidly changing pensions and investment environment.

“Vanguard’s Target Retirement Funds are designed to help address these challenges, by offering a straightforward fund solution based on investment best practices and managed by experienced investment professionals.”

Vanguard TRFs

The TRF range invests in a combination of “low-cost, high-quality” equity and bond index funds and exchange traded funds. The TRF automatically adapts the asset mix for different stages of the investor’s journey to and through retirement.

They can be included in a tax-efficient pension wrapper, such as an ISA, which Vanguard noted was increasingly being used by investors to save for their retirement.