What are target date funds?

Then, as you move closer to your goal - be it buying a home or saving for a child's university fees - they gradually move your money into less risky assets, such as bonds and property, to ensure your capital is at increasingly less risk of a collapse at the exact moment you need the money.

This is effectively a packaged version of the de-risking process you might otherwise implement for yourself when planning for old age or with the help of an independent financial adviser (IFA).

Different target date funds mature on different target dates in the future - so if you're hoping to fund your child's university fees in, say 2030, you would pick a 2030 target date fund; if your aim is to retire 10 years after that, you would go for the 2040 target date fund option.

In the US, target date funds are huge. Of the millions of US savers with 401(k) pension plans - the American equivalent of a private pension with no guaranteed payout - more than one in two now hold their savings in some form of target date fund, according to research from Vanguard, the retail fund management giant.

By contrast, target date funds haven't yet captured significant market share in the UK - and only a handful of providers offers them. But supporters of the concept say there are several reasons why target date funds have a big future.

Enormous target market

One of these supporters is Henry Cobbe, managing director at financial services consultancy BirthStar, which has been working with fund managers Architas and Alliance Bernstein to offer a suite of target date products.

Cobbe believes the potential target market for these funds is enormous. "This is a simple and low-cost way to have your money professionally invested without you having to pay for independent financial advice," he says.

Over time, target date funds offer exposure to a diversified range of assets including domestic and international stockmarkets, bonds and property, as well as more exotic options in some cases, with the proportion of the fund allocated to each of these assets set appropriately on the basis of investors' ages and when they're due to retire.

So why has the concept not gained more traction in the UK? One problem, suggests Patrick Connolly, a certified financial planner at independent financial adviser Chase de Vere, is that with relatively few providers spreading the message, many people have not yet understood how they differ from conventional 'lifestyle' fund options, which have been available for many years in the UK.