Lifestyling for Pensions

Lifestyling for Pensions

Do you have lifestyling on your private or works pension? 

Are you aware of what lifestyling can do for you and at times against you?

Lifestyling is an investment strategy which provides automatic switching of your pension savings into another fund, or funds which generally have a lower risk profile or aligns your pension savings to your attitude to risk, this typically happens on the run up towards retirement potentially over the last 5-15 years.

Pro’s of lifestyling:

  1. Switching from more volatile assets to low volatile assets happen automatically. 
  2. When you take your pension benefits, the current tax rules allow you to usually take up to 25% of your pension pot as a tax-free cash sum.  In order to make the process of taking your tax free cash more predictable you can move money into cash or cash like investments to help protect it from potential falls as you approach retirement. 
  3. You can change your mind at a later date.  For example, if your circumstances change:  you decide to work longer and continue to contribute to your pension, or extent your working career therefore wish to reset the lifestyling time period or stop lifestyling altogether.

Con’s of lifestyling:

  1. Your pension savings could be moved into a fund(s), that could prove to be a poorer short-term investment option than your current fund or funds.
  2. Lifestyling works towards your originally planned retirement age. If you decide to take your benefits before or after that age then lifestyling is not working towards your actual retirement date, and funds may not be switched at the right time to meet your aims.
  3. Your personal circumstances may change and so your lifestyle option may no longer be right for you.

What does the above mean, lets have a look at a couple of scenarios of late; 

2008 the banking crisis, for those that held equities that wished to take their pension benefits had seen a drop of their value (the FTSE100 lost 31.8%)

2022/2023 high inflation and regular interest rate rises, saw those in fixed interest securities and corporate bonds see a reduction of 20% 

Lifestyling certainly has a place within pensions helping to reduce the overall volatility in those final few years of retirement, a well diversified portfolio, regular reviews and working with your financial planner will certainly help keep you keep informed and risk align your portfolio for when you want to retire. 

If you are not sure if you have lifestyling included in any of your pension plans and would like to find out contact us on 01483 654135 or email direct on