What is Lifestyling?

You may not be aware that your company pension scheme reduces your risk exposure as you get older. Here's what you need to know about lifestyling

James Gard 20 September, 2021 | 10:09AM
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pensioner on the beach

What is Lifestyling?

If you are enrolled in a company pension, your provider will automatically switch you into less risky assets the closer you get to retirement. This is the standard way that company pensions are managed if they are defined contribution schemes.

Does it Offer Me a Certain Lifestyle?

No, the term is slightly misleading in that “lifestyle” in this context really means “age” or your stage in the life cycle. Lifestyle funds don’t guarantee a certain standard of living or even guarantee that your pot will be worth a certain amount when you retire. 

What’s the Thinking Behind It?

Equities are seen as more volatile and risky assets than bonds and cash, so your exposure to the stock markets is reduced as you get older. Someone with 100% in equities approaching retirement could see their pension pot shrink significantly if the market crashes, as it did in spring 2020. Your retirement plans could be turned upside in this scenario.

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About Author

James Gard  is content editor for Morningstar.co.uk