Your employer may have selected one of our LifePath funds as the default fund for your scheme. If so, this is the fund your pension will be invested in if you haven’t chosen your own fund. You’re also free to choose any of the LifePath funds through your TargetPlan or Aegon Master Trust pension scheme.
The LifePath funds are what’s known as target dated funds. This means they automatically change what they invest in as you get closer to your selected retirement date. You’ll be put into a fund that includes the year you plan to retire in. So, for instance, if you’re retiring in 2035, you’ll be put into a fund that has 2034 – 2036 in its name.
You can find out which fund or funds you’re currently invested in, switch funds or change your retirement date by logging in to TargetPlan and selecting View and manage. It’s important to check, especially as you get closer to retirement, as you may find you want to take your retirement savings in a different way or at a different retirement age.
There are three LifePath funds:
LifePath Flexi
For those planning to leave their pension pot invested and draw down income from it in retirement.
LifePath Retirement
For those planning to buy an annuity (guaranteed income) at their target retirement age.
LifePath Capital
For those planning to take their retirement savings as a cash lump sum at their target retirement age.
How the LifePath funds work
Each of the LifePath strategies works in three stages:
- Early career
- Mid-career
- Approaching retirement
All three LifePath funds, Flexi, Retirement and Capital invest identically in the early and mid-career stages. As members approach retirement, they invest differently.
There’s no guarantee the fund will meet its objectives. The value of investments and any income taken, can fall as well as rise and isn’t guaranteed. The final value of a member’s pension pot when they come to take benefits may be less than has been paid in.
When you’re still at the early stage of your career, the funds focus on growth, investing largely in equities (company shares).
Historically equities have provided greater long-term growth potential than lower risk asset classes, like fixed income securities (government and corporate bonds) or cash. But there’s no guarantee they will in future and because they’re riskier than other asset classes, there’s a greater chance they can fall in value and by greater amounts. The funds take this risk early on because your savings have time to recover from any market shocks, although there’s no guarantee.
We aim to grow your savings responsibly, focussing on managing climate risks, which is why at this stage, around 80%¹ will be invested in strategies that incorporate environmental, social and governance (ESG) screens.
As members progress through their career, the funds focus on building wealth by introducing greater diversification, combining riskier assets (like equities) with investments designed to offer a degree of protection against market falls (like bonds), although there’s no guarantee they will.
As members get closer to retirement (within 10 years), the Aegon BlackRock LifePath Flexi fund gradually moves into what are generally considered to be lower-risk investments. This could include, for example, government and corporate bonds – loans to governments and companies from the UK and overseas.
The Flexi fund continues in this way until it reaches approximately 40% in global equities and 60% in bonds (also known as fixed income securities) at your target retirement age. Around 45%¹ at this stage will be invested in funds incorporating ESG screens.
The fund will maintain the same 40%/60% mix into retirement and assumes you will want to remain invested and drawdown an income from your savings. We believe this mix provides a balance between risk and potential returns that can help guard against the effects of inflation, as well as supporting income withdrawals, although there’s no guarantee.
The value of your savings and any income isn’t guaranteed and may fall as well as rise in value. You could run out of money. Moving into lower-risk investments could also mean you miss out on some growth if markets go up.
How the Aegon BlackRock LifePath Flexi changes as members approach retirement
As you get closer to retirement (within 10 years), the Aegon BlackRock LifePath Retirement fund gradually reduces the amount invested in equities and moves into a mix of government and corporate bonds.
In the final two years, the Retirement fund moves a proportion into cash investments to cater for your tax-free cash entitlement (currently 25% of the total value). This means you’ll end up with an investment split of 75% bonds and 25% cash at your target retirement age. Around 45%¹ at this stage will be invested in funds incorporating ESG screens.
This mix aims to ensure that, even if the value of your retirement savings goes down just before you retire, the size of annuity you can buy should stay broadly the same, although this isn’t guaranteed.
The strategy isn’t designed for long-term investing after you’ve retired. The ‘spending power’ of your retirement savings may be eroded by inflation (meaning you can buy less with your money) if you leave it too long before you buy an annuity.
This information is based on our understanding of current taxation law and HMRC practice, which may change.
How the Aegon BlackRock LifePath Retirement changes as members approach retirement
As you get closer to retirement (within 10 years), the Aegon BlackRock LifePath Capital fund automatically changes focus from a growth objective to capital preservation.
The Capital fund gradually moves out of equities and bonds until it’s 100% invested in cash-like investments at your target retirement age. It assumes you’ll want to take all your retirement savings as a cash lump sum.
This strategy isn’t designed for long-term investing after you’ve reached your target retirement age. The spending power of your retirement savings may be eroded by inflation (meaning you can buy less with your money) if you leave it there too long. Moving into lower risk investments could also mean you miss out on some growth if markets go up.
Any cash taken above 25% of their pension pot will be taxed as earned income. This information is based on our understanding of current taxation law and HMRC practice, which may change.
How the Aegon BlackRock LifePath Capital changes as members approach retirement
LifePath’s responsible investment credentials
Over the past two years, we’ve worked closely with BlackRock to move assets in the LifePath default strategies into funds incorporating environmental, social and governance (ESG) screens.
As at December 2022, 80% of assets in the early years and 45% in the retirement stage fund have been moved into funds incorporating ESG screens.1
We plan to increase these levels over the coming months and years, in line with the LifePath climate objective that states the funds will aim to target an absolute reduction of 50% in carbon emissions intensity by sales, over the 10-year period between June 2019 to June 2029.2.
This aligns with our commitment, made in 2019, to reach net zero by 2050 and to halve emissions by 2030 for our default funds.
Important information
The value of an investment can go down as well as up and isn’t guaranteed. The final value of your pension pot when you come to take benefits may be less than has been paid in.
For advice as to whether a fund is suitable for you, please speak to a financial adviser. MoneyHelper gives free and impartial guidance to help make your money and pension choices clearer. If you don’t have a financial adviser, you can visit MoneyHelper to find the right one for you. There may be a charge for this.
¹Aegon and BlackRock. As at December 2022.
²The current intensity metric to be monitored is intensity by sales, however there is flexibility within the prospectus for this to change through time. ‘Intensity by sales’ measures the volume of a company’s carbon emissions divided by its total revenue, so CO2 emissions / $M revenue.