Beware the ‘Lifestyle’ Option

Clients of Aegon’s Lifestyle product are automatically transferred into the Scottish Equitable Retirement fund, which invests 75 per cent in gilts and 25 per cent in cash, with a one per cent annual management charge as they approach their pension end date. This is the date that policy holders will have hoped to retire at when they took their plans’ out 20, 30 or 40 years previously.

But that fund has lost more than 40 per cent in the past three years, and 30 per cent over the past five years, as volatility has been acutely high in the gilt market.

This was first as a consequence of the “mini” Budget in 2022, and subsequently as a result of the Bank of England raising interest rates. The losses stem primarily from the fund being invested in long dated gilts.

Those assets are generally regarded as being more likely to perform well in a world where economic growth is slowing and rates are likely to fall.

Those are precisely the opposite conditions to those which prevailed in 2022, when investors feared inflation more than a slowdown in growth, and so short duration bonds performed better. All of the gilt exposure in the fund is long duration.

And Aegon are not the only ones. If you are in some form of Lifestyle Strategy with your pension provider and withing 10 years of the original retirement date stated on your plan you may be moving into completely unsuitable funds for your future plans.

Please speak to your adviser if you have one, or speak to one of our pension and retirement specialist if not, to check and see what your plan provider is doing and if it will suit your circumstances.

www.brookswealth.co.uk         info@brookswealth.co.uk          01733 314553