Lifestyle default funds fall 9% in four months

Lifestyle pension default funds have lost 9% of their value in four months, according to research by Hargreaves Lansdown.


Its study, which is based on the average rate of return for all Hargreaves Lansdown savers using a lifestyle fund, also estimates that 720,000 pension savers are currently invested in default funds.

The research also found:

  • The 10-year UK gilt yield, bonds issued by the British government and generally considered low risk, has risen from 1.33% on 30 January to 2% on 12  June. Consequently, the average lifestyle fund has lost 9% of its value over this period.
  • Annuity rates have risen by 5% in the last four months.
  • Annuity rates have fallen by 13%, but lifestyle funds have produced an average return of 50% over the last five years.

Nathan Long, head of corporate pension research at Hargreaves Lansdown, said: “Successful pension investments in the run up to retirement should avoid a disaster scenario.

“This is a drop in investment value close to retirement that leaves employees no choice but to delay retirement or limp through with less than they had planned for.

“The correct investment mix depends entirely on the retirement plans of the member. The best way for employers to help staff avoid a nasty shock late in the day is to offer access to on-going workplace financial education. Employees can then plan for themselves what suits them best.”