How do Annuity Target and Lifestyle funds work?

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Annuity target funds (and their predecessors, Lifestyle funds) are a type of retirement target fund.


Annuity Target funds are designed for pension scheme members who will buy a guaranteed annuity (pension) when they reach retirement.

It automatically adapts as you get close to retirement, recognising that your priorities are likely to change.

There are two main stages

Growth - When savers are still some way off from retirement.

Retirement target - When savers are approaching retirement.

Growth stage

In this stage these funds invest in a mix of investments designed to grow your pension.

You can choose the fund that best meets your savings needs and attitude to risk.

Retirement target stage

Annuity Target funds are designed for savers who don’t make active fund choices, and  know they want to buy an annuity when they retire. They’re also sometimes called Lifestyle funds.

These funds are a type of Retirement Target fund. Find out more.

In the final years before you’ve told us you want to retire, we automatically start to prepare your savings for when you buy an annuity in retirement.


We’ll gradually move your fund out of its growth stage investments, and into long gilts, with the aim of preserving the size of annuity you’ll be able to buy.


When you’re nearly at retirement, we’ll also move 25% into cash to cater for your tax-free cash entitlement.

Why do we use long gilts?

If the value of long gilts goes down, annuity rates tend to go up.

And if the value of long gilts goes up, annuity rates tend to go down.

So even if your fund value goes down just before you retire, you’ll be able to buy roughly the same size of pension – although this relationship isn’t perfect.

An example

Please note that this is just an example, some of our lifestyle funds will move into gilts and cash at slightly different times.

The choice is yours

Annuity Target and lifestyle funds are designed for use by workplace pension schemes. If an employer selects it as their scheme's default fund, members  who don't make their own fund selection will be automatically invested into it when they join their workplace pension scheme. This means they're invested from day one.


Your employer will have chosen it because they think it best meets the average needs of their workforce, and because they think that most members plan to buy an annuity on retirement. However, it may not be the best fit for you.


If you want more control over where your money is invested, you can select a fund that’s more tailored to your needs. If so, please take a look at our other investment options.

Your choice of investment fund can have a big effect on your pension benefits. If you're in any doubt about which fund's right for you, you should speak to a professional financial adviser. If you don't already have one, you can find one near you at new window)

You have lots of choice about how you access your retirement savings. We’re here to help. Our website, Your Retirement Planner, has information and tools to help you understand your options when you get close to retirement.