Most workplace pension holders have never heard the word ‘lifestyling.’ They set up their pension when they joined their employer, contributions go in each month, and they assume the money is being managed sensibly. What many don’t realise is that a default investment strategy may have been running in the background the entire time, quietly shifting their assets out of growth investments and into lower-risk holdings, often years before retirement arrives.
Lifestyling was created in the time of Annuities, but for someone planning to retire into drawdown, it is a mechanism designed for a retirement world that no longer exists. And by the time most people discover they’ve been placed in a lifestyling arrangement, the damage is already done.
Simon Garber, Managing Director of 2020 Financial, is direct about what this means at an industry level. His view, shared by many in the financial planning profession, is that the UK is sleepwalking into another pension crisis. “Lifestyling is costing pension holders, particularly high earners, tens of thousands of pounds in lost investment growth, with no recourse once the damage has accumulated. The practice needs urgent overhaul and replacement with an investment strategy that reflects the pension landscape as it actually is today: one dominated by flexible drawdown, not annuity purchase”.
Until that overhaul happens, the responsibility falls on pension holders themselves. You cannot assume your employer’s default pension strategy is working in your interest. This article explains what lifestyling is, why it is so damaging for drawdown investors, and what to do about it.
What Is Pension Lifestyling?
Pension lifestyling is an automatic investment strategy built into many workplace defined contribution pension schemes. As you approach your selected retirement date, the scheme gradually moves your pension pot out of growth investments, equities and higher-return funds, and into lower-risk assets such as bonds, gilts and cash.
The shift typically begins 5-10 years before the target date, and certain legacy arrangements begin de-risking from a fixed age, such as 60, regardless of the retirement date selected.
The process is automatic and invisible. There is no letter, no alert, no prompt to review. The assets simply move on a pre-set schedule. By the time you reach the selected date, a significant share of your pot may be sitting in near-cash or low-return defensive holdings.
Why Lifestyling Was Created — and Why It No Longer Fits for Most High Earners
Pension lifestyling was designed for the annuity era. Before pension freedoms were introduced in 2015, the overwhelming majority of defined contribution pension holders used their pot to purchase an annuity at retirement: a one-off transaction that converted the entire accumulated pot into a guaranteed income for life. The value of that annuity was heavily influenced by interest rates and bond yields at the precise moment of purchase.
In that context, protecting the pot from a sudden market fall in the final years before the annuity purchase made reasonable sense. A 20% equity market drop in the year before a retiree converted their entire pot to an annuity would have been genuinely damaging and very difficult to recover from. De-risking ahead of that fixed conversion point was a rational form of insurance.
Pension freedoms introduced in 2015 fundamentally changed this. The vast majority of high earners now retire into drawdown: keeping the pension invested, drawing income flexibly, and relying on continued investment growth across a retirement that could last 30 to 45 years. For a drawdown investor, lifestyling doesn’t protect against a risk; it creates one. It removes the growth assets most needed and replaces them with low-return holdings that drag down the portfolio at a time when it should be growing.
Pension lifestyling was built to protect against a market fall at the moment of annuity conversion, a risk that no longer exists for most DC pension holders. For a drawdown investor, it doesn’t manage risk. It creates one that wasn’t there.
Target Retirement Age: Inadvertently triggering pension lifestyling
There is a feature of workplace pension lifestyling that most members never consider, and that can have consequences far larger than the lifestyling mechanism itself: the retirement age field.
When you enrolled in your workplace pension, you were asked to select a target retirement date. Most people chose a number quickly, often 60 or 65, and never revisited it. What most people don’t realise is that in any scheme running a lifestyle strategy, this date is the trigger from which the de-risking clock runs.
Some older workplace schemes carry a scheme-level retirement age of 60, meaning de-risking begins earlier, regardless of what date you personally selected. If you are in one of these schemes and have also lowered your own selected retirement age below the default, the de-risking process starts even earlier than that. These two factors can compound into a situation in which assets are moved out of growth investments a decade or more before you intend to retire, without any prompt or notification.
As Simon Garber, Managing Director of 2020 Financial, explains: “There is always a retirement date set on a pension. It doesn’t mean anything in terms of when someone will retire. It is just a number. But it has a massive impact on lifestyling. Especially if a person chooses a lower retirement age without realising, then the process starts from a younger age, and you have less time invested in growth-oriented assets.”
The scenario that affects more people than you might think
Consider someone who joined their employer at 40 and selected a retirement age of 55. They are now in their mid-50s. What they don’t yet know is that their scheme’s lifestyle strategy may have begun de-risking their pension five years ago, at age 50, when they were still heavily contributing, still earning well, and had years of potential investment growth ahead of them.
By the time they check their fund holdings, a substantial proportion of the pot may already have been shifted from equities to bonds and other lower-risk assets. The market gains of the past decade have been partially missed. The capital that could have been compounding in growth assets was quietly moved into holdings that delivered a fraction of those returns.
There is nothing to be done about it. The growth not captured during those years cannot be recovered. The pot at retirement is lower than it should have been, and that lower base compounds into a lower income for every year of retirement.
By the time most people discover that lifestyling has been running in their pension, the growth it cost them is already gone. Catching it early is the only way to limit the damage.
Why the Pre-Retirement Decade Is the Worst Time to De-Risk
For most high earners, the decade before retirement is when earnings are highest, contributions are largest, and the pot has its greatest growth potential. This is precisely the period lifestyling targets.
The argument for de-risking at this stage is that there is less time to recover from a market fall. This is true but incomplete. A 50-year-old retiring into drawdown at 60 is not investing for 10 years. They are investing for 30, 40 or potentially 50 years. The money entering the pension at 52 could remain invested for another 48 years. Lifestyling cuts off this compounding potential at the point when the capital base is largest.
A market fall in a drawdown portfolio is also a very different event from a market fall at the point of annuity purchase. A drawdown investor can temporarily adjust income, draw from ISA assets, and allow the portfolio to recover. The fixed-date catastrophe that lifestyling was designed to prevent does not exist in the same form for a drawdown retiree.
At 50, with a £600,000 pension pot and 10 years to retirement, the compounding potential of that capital is significant, from investment returns and from substantial new contributions still entering the pot. A lifestyle strategy that begins de-risking at 50 or 55 doesn’t protect the retirement; it diminishes it.
What Does Pension Lifestyling Actually Cost?
The cost is not a single visible event. It accumulates in the form of investment returns not earned, compounding not captured, and a capital base at retirement that is lower than it should be.
An illustrative example: a high earner with a £600,000 pension pot at 50, contributing heavily through to retirement at 60. A lifestyle strategy beginning at 50 progressively shifts assets from equities to bonds over the decade. If equities return an average of 7% per year and the defensive assets return 3%, the compounding difference on the existing £600,000 pot alone is well over £200,000 over 10 years, before any additional contributions are considered. On a pot of £1 million or more, the gap is larger still.
A lower pot at retirement means either a lower drawdown income or a higher drawdown rate. A higher drawdown rate on a smaller pot depletes faster. The effect runs forward through the entire retirement.
How to Check Whether Lifestyling Is Running in Your Pension
- Log into your workplace pension platform. Aviva, Scottish Widows, Legal & General, Standard Life, Nest and Royal London all have online portals. Use the password reset function if needed.
- Find your investment profile or fund selection. Look for fund names containing ‘lifestyle,’ ‘pre-retirement,’ ‘target date,’ or a fund name combined with a year.
- Check your selected retirement date in your personal profile or account settings. Confirm it reflects your actual plans.
- Find out when the lifestyle strategy starts. Check the scheme booklet or fund factsheet, or call the helpline and ask: at what age, or how many years before my selected retirement date, does the lifestyle switching begin?
- Review your current fund allocation. If you are within 10 years of your selected date, check the split between equities and bonds/cash. A significant shift toward defensive assets confirms the strategy is already running.
- Contact HR or the scheme trustees if the platform is unclear. They can confirm whether a lifestyle profile applies and on what schedule.
What to Do If Lifestyling Is Already Running
More than five years from retirement
Opt out of the default lifestyle profile and move to a self-selected fund strategy. Most platforms allow members to switch out of the default. For a high earner retiring into drawdown, a globally diversified, equity-led strategy is almost always more appropriate. You can also update your selected retirement date to delay the lifestyle trigger while the investment review is underway; this is a short-term measure, not a long-term solution. N.B. Speak to your financial adviser and make sure that any changes you make are appropriate to your situation.
Within five years of retirement
Some de-risking has already occurred, and switching back to growth assets requires a considered decision. How much investment risk is appropriate at this point depends on your specific pot size, other income sources and overall retirement picture. A 58-year-old with a £1.5 million pot and a DB pension providing an income floor can afford different exposure from a 58-year-old with £600,000 and no guaranteed income. Doing nothing is not the right answer; neither is reverting to an aggressive strategy without modelling the implications. This is a good time to seek personalised financial advice.
No investment flexibility in the scheme
Some older schemes do not allow members to opt out of the lifestyle strategy or self-select funds. In these cases, transferring accumulated benefits to a self-invested personal pension (SIPP) gives full investment control. This is appropriate where the pot is large enough to justify the change and where the scheme holds no valuable guaranteed benefits, such as guaranteed annuity rates, that would be lost on transfer. Any transfer of this nature requires regulated financial advice from a Pension Transfer specialist. Don’t opt out of anything until you have spoken to a Financial Advisor.
Lifestyling and the Wider Retirement Picture
Pension lifestyling is a symptom of a broader problem: workplace pension defaults are designed for the average employee, not for the high earner planning early retirement into drawdown. The default fund, the default contribution rate and the retirement age field were all configured with a generic member in mind. They serve their purpose for many people. They are poorly suited to a senior professional in their peak earning years planning to retire at 55 or 60.
The investment strategy in a workplace pension cannot be reviewed in isolation. It needs to sit alongside the SIPP, ISA portfolio, any DB pension held and the planned drawdown structure. A lifestyle strategy running in the workplace pension while the SIPP is fully invested in growth assets creates an incoherent overall portfolio. The annual planning review is the moment to assess all of these together.
The retirement age field, specifically, deserves a check right now. Most people set it once, early in their career, and never return to it. It is one of the least-noticed settings on a pension platform and one of the most consequential.
Is Lifestyling Running in Your Workplace Pension?
If you have a workplace pension and haven’t reviewed your investment profile or selected retirement date recently, there is a meaningful chance that a lifestyle strategy is already running, and has been for longer than you realise.
At 2020 Financial, reviewing the full pension landscape, including the investment strategy in workplace schemes, is a standard part of the annual planning conversation for every client. We work exclusively with senior professionals and high-earning couples. Every conversation is with Simon Garber directly. You’ll get a clear picture of what’s running in your pension, what it has cost, and what the right strategy looks like from this point forward.
No obligation. No jargon. Just clarity.
