A recent survey carried out by AON found that forty per cent of default funds assume that the pension scheme member will purchase an annuity when they reach their selected retirement date.
Since the introduction of freedom and choice reforms in April 2015 there has been a large reduction in the number of people purchasing annuities at retirement with many choosing other options such as drawdown.
Eighty five per cent of pension schemes funds are invested in default funds. The change in the way in which pension income can be taken has introduced the need for pension schemes to rethink their default fund approach.
A default lifestyle fund should aim to achieve the anticipated income requirements of the majority of pension scheme members. We are therefore expecting to see pension providers adapt their default funds to reflect these changes.
If you would like a review of your pension benefits, please get in touch.