This article is relevant for customers invested in funds which follow a target date fund or lifestyle strategy only. These funds are designed to automatically change what they invest in as you approach your target retirement age. If you have chosen your own investments, you may be invested in a fund which does not automatically change the investment mix as you get closer to retirement.
Your target retirement age is the age you plan to access your pension savings. While it might seem like a decision for the future, understanding the significance of your target retirement age and its impact on your investments is important at every stage of your retirement journey.
Understanding how default funds work
If you don't choose where to invest your pension, you'll automatically be invested in your scheme’s default fund which has been chosen by your employer or trustees.
Default funds are designed to invest and manage your pension contributions for you, offering a hands-off approach to saving for retirement.
The standard default option for members of TargetPlan is the Aegon BlackRock LifePath Flexi fund, which is a target date fund. This means it will automatically change what it invests in as you get closer to your selected retirement date. However, please be aware that your employer may have chosen a different default fund for you. You can check what fund you are invested in by logging into your online TargetPlan account aegon.co.uk/targetplan
Understanding how default funds work
If you don't choose where to invest your pension, you'll automatically be invested in your scheme’s default fund which has been chosen by your employer or trustees.
Default funds are designed to invest and manage your pension contributions for you, offering a hands-off approach to saving for retirement.
If you are invested in Aegon Master Trust, the default option is the Aegon BlackRock LifePath Flexi fund, which is a target-date fund. This means it will automatically change what it invests in as you get closer to your selected retirement date. However, please be aware that your employer may have chosen a different default fund for you. You can check what fund you are invested in by logging into your online TargetPlan account aegon.co.uk/targetplan
Why do my investments need to change?
If you're invested in a lifestyle or target-date fund, your investment mix will change as you get closer to retirement, to align with your evolving investment priorities and ability to take on risk.
When you're furthest from retirement, it’s sensible to grow your pension pot as much as possible. A common strategy to achieve this is to invest in assets such as company shares (equities), which are typically considered higher risk, higher return investments.
As you approach retirement, it’s important to reduce the risk of your investments falling by moving into investments typically considered to be lower risk, such as bonds (loans to governments and companies). This process, known as derisking, typically begins within a specific timeframe before your target retirement age.
Why is target retirement age important?
Your target retirement age is important because it determines when the derisking phase starts. Ensuring it accurately reflects your retirement plans helps you to both maximise your growth window and importantly, to derisk at the right time.
Determining your target retirement age
Your target retirement age is personal to you, determined by your personal retirement goals, health and financial situation. Our guide on Questions to ask yourself about retirement provides useful insights to how you might begin to think about this.
Your employer has set a default target retirement age for your scheme, this is usually 65. This age will be used to determine when your investments begin to derisk if you don’t choose your own target retirement age.
Make it personal
If you want to personalise your target retirement age, the earliest you could set this to is age 55 (increasing to 57 from April 2028). In some circumstances you may be able to take some benefits earlier than this. For example, if you have a pension with a protected pension age or you’re unable to work due to ill-health (as defined by your pension scheme). The latest target retirement age you can choose is 75.
You can find details of your target retirement age by logging into your TargetPlan online account. If you need to make a change, you can do this online if your scheme allows.
Key points to takeaway:
- Your target retirement age is when you plan to access your pension savings, whether you're still working or not
- It may determine when your pot shifts from investing in assets, considered to be higher risk to assets considered to be lower risk
- It's personal to you and should reflect your retirement goals
- Your employer sets a default target retirement age if you don’t choose one
- You can change your target retirement age at anytime
Your target retirement age is important at every stage of your journey, not just as you approach retirement.