What is a Target Date Fund

A Target Date Fund is a fund that adjusts the way your savings are invested as you move closer to - and then into - retirement.

The Target Date Funds currently have three different stages; growth, approaching retirement and retirement.

As you progress through your working life and get closer to retirement, we will adjust the mix of investments within the fund, so that you don’t have to. If you’re a long way from your target retirement date, we’ll invest more of your pension savings in higher-risk investments, such as company shares. Although they are more likely to go up and down in value in the short term, this type of investment is also more likely to grow your pension savings over the longer term. If you’re closer to retirement, we will invest more of your pension savings in lower-risk investments, such as bonds. Although they may not grow by as much, your savings are less likely to fall in value, enabling you to plan for your retirement with more confidence.

The fund also benefits from active fund management, allowing the fund manager the flexibility to make tactical adjustments in response to any changes in market conditions or the longer-term economic outlook. And because you can remain invested in the fund beyond your target retirement date, you have the flexibility to decide when and how you want to use your pension pot.

For a more detailed explanation of what they invest in, how the strategy changes over time and the advantages and disadvantages of investing in one of these funds, please see our Guide to the Target Date Funds (PDF 1207KB).

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