Mercer Aspire Annuity Matching

The Annuity Matching Fund invests in a diversified mix of medium-dated core Eurozone government bonds and corporate bonds. Mercer also says the fund may hold temporary cash positions as part of portfolio management. The mix of bonds and the manager allocations are reviewed regularly and may change over time.

The Annuity Matching Fund is designed for people within seven years of retirement who expect to buy an annuity at retirement. Its objective is to help protect against changes in the cost of buying an income for life. In simple terms, it is aimed at investors who want their retirement savings to better match the price of an annuity.

The Annuity Matching Fund aims to provide protection against changes in the cost of buying an annuity at retirement by investing in bonds that are intended to move in a way that helps match annuity pricing. Mercer uses market knowledge and investment expertise to select and regularly review the underlying bond mix and managers. This makes it a liability-matching style fund, meaning it is built to align with a future spending need rather than to chase growth.

The Annuity Matching Fund highlights inflation risk, currency risk and manager risk. Inflation risk means rising prices could reduce what the fund can buy in the future; currency risk means exchange-rate movements can affect returns when investments are linked to different currencies; and manager risk means the fund could be hurt if a chosen manager makes poor decisions. Because the fund holds bonds, its value can also move as interest rates and credit conditions change.

The Annuity Matching Fund is distinctive because it is specifically built around the later-life goal of buying an annuity, rather than a broad retirement growth target. Mercer combines specialist active and passive managers and can replace them when needed, while the underlying bond allocations are reviewed regularly. The fund also does not take into account the EU criteria for environmentally sustainable economic activities.