What is a ‘lifestyling’ pension investment strategy?

Help to plan a pension investment strategy

What is a ‘lifestyling’ investment strategy?

Lifestyling is an automated portfolio strategy which gradually reduces investment risk over time.

Under pension lifestyling, investment management is automated.  Money is disinvested from the investment markets to reduce risk exposure as you approach a certain date or age.

Lifestyling is a simple and low-cost pension investment strategy. It is best suited to those with small pension pots or targeting annuity purchase at retirement. If you have a good amount in pensions, or are intending to enter income drawdown at retirement, you may consider a different strategy.

What are target retirement funds?

Target retirement funds often work under a lifestyling strategy. This can be one or a combination of funds to achieve a low risk portfolio at the target date. Funds may be named, for example, ‘balanced 2040’. In this case, a balanced strategy would be used, targeting a low risk portfolio by the year 2040. This would be used for an investor with a target retirement year of 2040.

Is a lifestyling pension investment strategy right for me?

If you intend to withdraw all funds at retirement, or purchase an annuity, it might be right for you. If you have a large fund and want to design your retirement income under income drawdown, it would be better to manage the investment portfolio to better suit your needs.

An automated investment strategy intends to reduce risk, but it doesn’t normally account for market conditions. That means, if your lifestyling is targeting disinvestment in a poor year for investments, or a market crash, your money could be switching to cash at a bad time. It is really important for pension investments to be regularly reviewed, particularly in your final 5-10 years before starting pension income.

Why are my funds invested into a lifestyling strategy?

A lifestyling strategy has most likely been presented to you in a ‘direct offer’ format.

This typically means that an employer has engaged a corporate adviser in order to put a pension scheme in place. Under a company pension, the members (employees) are not fully advised individually, instead are provided with a pack of information with which to make their own decisions.

While a plan is small and the company is contributing, the company pension should be kept. Make sure you understand your investment strategy and the alternatives available to you. Read through the documentation provided to you carefully.

Can I change my pension investment strategy?

Most pensions will allow you to ‘switch’ investment funds. Ask your pension provider for a funds list and consider both the costs of switching and investment management. Use our research toolkit to contact your pension provider and ask the questions an IFA would.  

Alternative pension investment planning options

With pension and retirement planning, it is important to balance cost with reward, over both growth opportunity and the functionality of your plan. It may be that your pension doesn’t offer a wide range of investment options, and that it wouldn’t function under ‘income drawdown’ at retirement. In that case, it may be time to consider a new pension plan.

Review your pensions and retirement plans regularly, at least annually while in the savings stage. As you approach retirement, consider getting advice. Advice can be ‘one off’, and can be paid for from your pension savings rather than out of your pocket.

We offer a free pension review with a regulated financial adviser. Utilise our free research toolkit and analysis service before making any changes to your planning.


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