Aegon revamps default pension funds

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Aegon has launched a new range of default funds for its workplace pension schemes in response to the pension freedoms.

The five funds have platform charges of between 0.05 per cent and 0.4 per cent.

They all use Aegon’s “flexible target glidepath” which targets three retirement income decisions in the final six years of saving.

The flexible strategy is for people planning to go into drawdown, annuity for savers who want a guaranteed income and a cash target is aimed at schemes with very small pots.

At retirement the flexible strategy leaves around 26 per cent in equities, 49 per cent in fixed interest and 25 per cent cash.

All Aegon’s existing workplace funds – which targeted annuities through lifestyle strategies – remain available.

Aegon investment director Nick Dixon says: “Auto-enrolment means that 80 per cent of workers now view their workplace pension as their main method of saving. As around 72 per cent stay in their scheme’s default fund, we must offer high-quality investments for those who don’t make active investment decisions.

“Within five years advisers estimate only 25 per cent of people will look to purchase an annuity at retirement. The dramatic shift in investor behaviour means traditional lifestyle funds which target an annuity by moving into long gilts no longer serve ‘typical’ workplace investors.

“Risk reduction using a diversified investment strategy tends to offer better returns for less risk, especially where investors delay or phase into retirement, and where they choose drawdown.”