What is a default fund, and should I be concerned if I’m in one?

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A default fund is a type of lifestyle fund(Opens new window)(Opens new window)(Opens new window)(Opens new window)(Opens new window)(Opens new window)(Opens new window) that members of a pension scheme are invested in if they don’t choose a fund when they join their scheme. 


The advantage of a scheme default is that your pension contributions are invested as soon as you join your scheme, and are managed for you from the moment you join your scheme right up to your selected retirement date. Default funds tend to get a higher level of scrutiny because employers and scheme trustees have a regulatory obligation to ensure their default fund remains appropriate for their scheme.

The disadvantage is that the default fund is not tailored to your individual needs, it is chosen to meet the needs of the average scheme member. And, if your scheme was set up before pensions freedoms were introduced in 2015 your lifestyle fund may still be designed for annuity purchase (guaranteed income) at retirement whereas you may prefer to take advantage of the freedoms to stay invested or cash in your retirement savings.

Your Retirement Planner(Opens new window)(Opens new window) can help you work out your options at retirement. If you’re in any doubt, you may want to talk to your financial adviser. If you don’t already have one, you can find one near you at unbaised.co.uk(Opens new window)(Opens new window).