RWM Explains: What is Pension lifestyling?

Pension lifestyling can quietly shape your retirement without you ever realising it’s happening. Built into many pension plans, it automatically adjusts your investments as you approach retirement, it can have a significant impact on the size of your pension pot and the choices available to you later in life. Understanding how it works, when it supports your goals and when it may unintentionally hold you back is an important part of making informed decisions about your future. Alex Henry, Partner at Realise Wealth Management, breaks down the key questions.

What is pension lifestyling?

Pension lifestyling is an automatic process used by many pension providers to gradually reduce the level of investment risk in your portfolio as you approach your selected retirement age. When you’re more than ten years away from retirement, most default strategies place you in higher-risk, growth-focused investments, often 100% equities, because this is where long-term growth potential is strongest.

As you move within ten years of retirement, the strategy typically shifts into a more balanced mix, introducing fixed-interest assets such as corporate bonds. By the time you’re around five years from retirement, many default lifestyling strategies remove equities altogether and move fully into bonds and gilts. While some schemes take a more nuanced approach, the overall trend is the same: reduce risk as retirement gets closer.

Why lifestyling can be helpful and when it can work against you

For some people, lifestyling provides reassurance. It smooths the transition into
retirement and reduces the risk of a sudden market downturn just as they’re preparing to draw an income. For those who are naturally cautious, or who don’t have an adviser guiding them, this can feel comforting.

However, the timing of de-risking is critical. If your portfolio is shifted out of equities immediately after a market fall, such as the dot-com crash, the 2008 financial crisis or the COVID-19 downturn, you may lock in losses and miss the recovery that often follows. What looks like a “safer” move can, in reality, limit your long-term outcome.

The key point is that lifestyling is a one- size-fits-all mechanism. It doesn’t take into account your personal goals, your attitude to risk, your income plans or whether you intend to keep investing through retirement. For many people, the default timing isn’t aligned with their needs.

How to check whether you’ve been lifestyled

Many pension providers make this clear by using terms such as lifestyling, target date or age-related strategy in their fund descriptions. If your annual statement includes any of these phrases, or you notice a gradual reduction in equity exposure over time, it’s likely that lifestyling is in place.

If you’re unsure, you can:

• Contact your pension provider and ask directly
• Review past statements to see how your asset allocation has changed
• Speak to your financial adviser for a clearer interpretation

Not all providers make this obvious, so it’s worth checking rather than
assuming.

What to do if you don’t want to be lifestyled

Your options depend on your scheme. Many workplace and personal pensions allow you to opt out of the default strategy and choose your own funds or asset allocation. Others offer limited flexibility, in which case it may be worth considering whether transferring to a more suitable scheme could give you the control you need.

If retirement is approaching, don’t assume that lifestyling is automatically in your best interest. Understanding how your portfolio is set to change and whether that aligns with your goals is essential.

If you’d like to discuss whether your current pension strategy, including any lifestyling in place is aligned with your long-term goals, you’re very welcome to get in touch. Alex Henry can be reached at and 07477 694255.