Vanguard has launched a new range of five index funds for the UK market, called LifeStrategy.

Aimed at being a low-cost option, the funds carry annual charges in the range of 0.29 to 0.33 per cent. They have been designed to suit various levels of risk tolerance and will be invested in a mixture of global stocks and UK bonds, with between 20-100 per cent of the holdings comprising equities, depending on the fund.

The funds is built using a preset broadly diversified asset allocation with automatic rebalancing to avoid drift and ensure the fund stays in line with investors’ objectives, the firm said in a statement.

Vanguard joins a number of firms which are launching sets of low-cost, risk-rated funds ahead of the implementation of the Retail Distribution Review in 2013 – the UK regulator’s package of reforms intended to drive up standards of investment advice. Addressing investors' true level of risk tolerance is of course a priority for advisors as the Financial Services Authority clamps down on mis-selling and inadequate KYC procedures.

“Asset allocation is the most important portfolio construction decision. With automatic rebalancing to a preset asset allocation both investors, and their advisors, have peace of mind that their objectives are being maintained,” said Tom Rampulla, managing director of Vanguard UK.

“Using index funds as the underlying building blocks reduces volatility relative to using active funds, while also providing a low-cost, transparent and broadly diversified portfolio.”