Glossary · UK
What is Lifestyling (Pension)?
An automatic strategy in defined contribution pensions that gradually shifts investments from higher-risk growth funds into lower-risk assets as retirement age approaches.
Full Definition
Lifestyling is an investment strategy commonly used as the default option in defined contribution workplace pensions, under which a saver's pension pot is automatically shifted over time from higher-risk, growth-focused investments (typically weighted towards equities) into lower-risk assets such as bonds and cash as they approach their selected retirement date. The idea is to reduce the risk of a sudden market fall wiping out a large chunk of pension savings shortly before the saver plans to access them, when there would be little time left for the pot to recover before it is needed. Traditional lifestyling strategies were designed around the assumption that most savers would use their pot to buy an annuity at retirement, so they shifted heavily into bonds and cash in the final years -- but since pension freedoms introduced far more flexibility (including income drawdown, where a pot typically stays invested for growth well into retirement rather than converting entirely to cash or an annuity), many schemes now use "flexible" or "drawdown-focused" lifestyling profiles that retain a higher proportion of growth assets even close to and beyond the selected retirement date. Savers who plan to take their pension in a way that differs from the profile their scheme's default lifestyling assumes -- for example, planning to keep the pot invested in drawdown rather than buy an annuity, or planning to retire much earlier or later than the default date used by the scheme -- should check whether the automatic lifestyling strategy still matches their actual plans, since leaving the target retirement date unchanged on an old scheme can trigger de-risking years before it is actually wanted.