How do Annuity Target funds work?

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Annuity target funds (and their predecessors, Lifestyle funds) are a type of retirement target fund.

Annuity Target funds are designed for pension scheme members who will buy a guaranteed annuity (pension) when they reach retirement.

It automatically adapts as you get close to retirement, recognising that your priorities are likely to change.

There are two main stages

Growth - When savers are still some way off from retirement.

Retirement target - When savers are approaching retirement.

Growth stage

In this stage these funds invest in a mix of investments designed to grow your pension.

You can choose the fund that best meets your savings needs and attitude to risk.

Retirement target stage

Annuity Target funds are designed for savers who don’t make active fund choices, and  know they want to buy an annuity when they retire. They’re also sometimes called Lifestyle funds.

These funds are a type of Retirement Target fund. Find out more.

In the final years before you’ve told us you want to retire, we automatically start to prepare your savings for when you buy an annuity in retirement.


We’ll gradually move your fund out of its growth stage investments, and into long gilts, with the aim of preserving the size of annuity you’ll be able to buy.


When you’re nearly at retirement, we’ll also move 25% into cash to cater for your tax-free cash entitlement.

Why do we use long gilts?

If the value of long gilts goes down, annuity rates tend to go up.

And if the value of long gilts goes up, annuity rates tend to go down.

So even if your fund value goes down just before you retire, you’ll be able to buy roughly the same size of pension – although this relationship isn’t perfect.

An example

Please note that this is just an example, some of our lifestyle funds will move into gilts and cash at slightly different times.

The choice is yours

Your employer has chosen a default fund to suit the average member of your scheme. You may feel that another fund is more appropriate but still want the comfort of having a fund that automatically prepares you for the retirement outcome you want.


If so, you may want to take a look at our other retirement target options, including our Flexible Target funds or Aegon Workplace Default fund, designed for those who want to keep their options open or our Growth Tracker (Cash Target) aimed at those who will cash in their retirement savings.

Speak to a financial adviser to find out more.

You have lots of choice about how you access your retirement savings. We’re here to help. Our website, Your Retirement Planner, has information and tools to help you understand your options when you get close to retirement.