Your lifestyle fund currently targets one of three retirement outcomes - you can stay invested and take an income from your pension pot, or you can buy an annuity (guaranteed income) or you can cash in your whole pension pot. It's your choice.

If you’re not sure which option’s right for you, go to ‘Your retirement planner’ for some help deciding.

But if you decide to change how you want to take your benefits, you’ll probably need to review your investment fund at the same time.

You can choose from a range of alternative funds, including lifestyle funds that target a flexible outcome, those that target an annuity and those designed for people who want to take their benefits as a cash lump sum. You don’t have to have a lifestyle fund at all if you don’t want to. You’ll need to log in to your account to find out which funds are available with your current pension plan. 

If you’re in a lifestyle fund that is currently targeting an outcome, for example annuity purchase, that you don’t want, you’ll need to log into your account and switch funds. 

Why would I have to switch funds?

Because, when you get close to retirement (usually within seven years), your fund will automatically start moving into investments better suited to the outcome it’s targeting. So, for instance, a lifestyle fund that is targeting an annuity outcome will move into long gilts and cash as you get close to retirement. 

Long gilts are UK government bonds with maturity dates of 15 years or longer. They're essentially a loan to the UK government in exchange for interest. At the end of the loan period, investors get back the original loan amount. They're considered relatively safe simply because they're backed by the government, but because they're traded in the markets they can still go up and down in value.

While long gilts are a good guard against changes in annuity rates just before you retire, they may not be the best option if you’re intending to stay invested for 10, 20 or even 30 years in retirement.

If your lifestyle fund is targeting a flexible outcome, your fund will gradually move into a lower risk mix of investments as you get closer to retirement. At retirement, you'll remain invested in the markets which means your pension pot is still exposed to the ups and downs typically experienced by investments. You may prefer the security of a guaranteed income, in which case you may be more comfortable in a lifestyle fund that is targeting annuity purchase. 

What is an annuity?

An annuity is a guaranteed yearly income for life. At retirement, you can buy an annuity with your pension savings.  

The size of annuity you get depends on:

  • The size of pension pot you’ve built up
  • The annuity rates on offer – you should shop around for the best ones
  • Any extra features you want, like a spouse’s annuity or any annual increases in line with inflation
  • Your health – if you’re in poor health you may be able to buy a bigger annuity

Why buy an annuity?

Once you’ve bought an annuity, you have the security of knowing that your money won’t run out in retirement.

What’s the catch?

Annuity rates can fluctuate and you may not be able to secure enough income to live on. You lose control of your savings and may not be able to pass them on to your family.

Choosing an alternative fund

Your choice of funds depends on your current pension plan. You may not be able to choose another lifestyle fund1. To find out about your fund options, please log in to your account or find the fund list that applies to your pension plan on our fund prices and performance pages.

Your choice of fund is important so you may want to ask your financial adviser for help choosing alternatives. MoneyHelper gives free and impartial guidance to help make your money and pension choices clearer. If you don't have a financial adviser, you can visit MoneyHelper to find the right one for you. There may be a charge for financial advice.

Although we can’t give you advice, we can help you understand your options, including:

1Important information for Aegon One Retirement and Retiready customers.
If you decide to switch out of your current lifestyle fund, you won't be able to choose another lifestyle fund. This means that your investments won't change automatically as you approach retirement.

The value of an investment can fall as well as rise and isn't guaranteed. The value of your pension pot when you come to take benefits may be less than has been paid in.

Different tax rules and risks apply depending on the retirement outcome you choose - annuity, flexible income drawdown or cash. Your Retirement Planner can help explain these.

If you want more help with your retirement options, you can also visit Pension Wise, a service from MoneyHelper, is a free and impartial government service for over 50s offering guidance about your retirement options. This service is available online at MoneyHelper by phone on 0800 138 3944 or face to face by appointment. (Call charges will vary).