Advertising Feature Lifestyling: Is it time to course-correct your pension? Lifestyling is an investment strategy designed to reduce risk as savers near their retirement date in the scheme. It is usually utilised in workplace pension schemes, including those within the aviation sector. While the concept of lifestyling can provide protection against market volatility, it is not without its downsides. A real-life case study: It is a strategy that was designed for a time when most people purchased an annuity with their pension benefits and therefore it may not be appropriate for the current pension landscape and your individual circumstances. One of my clients, a 57-year-old airline Captain, was following A lifestyling strategy within his workplace pension. His portfolio Had already moved significantly into bonds and cash, even though He intended to continue working until at least 65. As he had set his Retirement age to 60, the lifestyling strategy started taking place sooner and was coming towards the final stages at age 57. Heres what BALPA members should be aware of: How lifestyling works: Lifestyling gradually shifts an investors portfolio from higher-risk assets (such as equities) to lower-risk assets (such as bonds and cash) as they near their planned retirement date. The aim is to protect accumulated wealth from market downturns at a stage when there is little time to recover losses. For many people, their pension scheme may be automatically applying a lifestyling approach, unless they actively opt out and choose an alternative strategy. The benefits of lifestyling: 1. Reduced volatility: As a well-earned retirement nears, large market fluctuations in higher-risk assets such as shares may significantly impact a pension pot. Lifestyling helps limit this risk by gradually moving funds into less volatile assets. 2. Hands-off approach: Many pilots have a demanding schedule and limited time to manage their investments. 3. Psychological comfort: Knowing that ones pension pot is gradually shifting to safer assets can provide peace of mind for those who are risk-averse. The downsides of lifestyling: 1. Missed growth opportunities: Moving into bonds and cash too soon can mean missing out on potential equity market gains. 2. Inflation risk: Bonds and cash may not keep pace with inflation, meaning the real value of a pension pot could erode over time. As life expectancy increases, ensuring that a pension lasts a lifetime is a significant concern. 3. One-size fits all approach: Lifestyling does not consider ones unique financial situation. Those with other investments, rental properties or plans for a phased retirement may not need to de-risk so prescriptively. 4. Lifestying is set towards the retirement age in the scheme, which is not necessarily the same as when an individual wants to retire. For many this would be set at a default age, perhaps 65. Unless changed/reviewed, lifestying could be shifting individuals too late or too soon to lower risk assets. 5. Market conditions matter: Lifestyling assumes a gradual reduction in risk over time, but it doesnt account for market conditions. If interest rates rise, bond values may fall, causing unexpected losses. Since asset allocation changes happen on pre-determined fixed dates without factoring in market conditions at the time, this approach could lead to poor outcomes during market volatility. 01793 741246 lewingtonwealth@sjpp.co.uk lewingtonwealth.co.uk THE LOG Spring 25 pp06-07 News.indd 6 2 Watts Barn The Old Dairy, Badbury Swindon, Wiltshire SN4 0EU After reviewing his finances, I explained the potential benefits of adjusting his allocation to equities, highlighting how it could support long-term growth whilst balancing risk. At the time of review, his pension pot was allocated 60% in bonds and cash, with only 40% in equities. By shifting a portion of his pension back into equities and diversifying across asset classes, he has since seen stronger returnshis portfolio has grown by 18% in the past year alone. He now has a more tailored approach that aligns with his retirement plans and financial goals. The most important benefit has been the choices this has afforded him principally, considering retiring a couple of years earlier. The advice given was provided after a full evaluation of their specific needs, circumstances and requirements. The solutions provided may not be suitable for everyone and the information here does not constitute advice. Conclusion: Lifestyling can be a useful strategy, but it is not suitable for everyone. Flightcrew, in particular, may benefit from a more flexible investment approach that considers their earning potential, financial goals and their risk tolerance. If you are unsure whether lifestyling is right for you, seeking professional advice could help you make more informed investment decisions. Reviewing your pension strategy with a financial adviser can help ensure you are on the right track and not missing out on potential long-term growth. The value of a pension will be directly linked to the performance of the funds you select and the value will therefore go down as well as up. You may get back less that you invested. Like to learn more? Join our upcoming webinar to explore this topic in more detail on Thursday 10th April. During the webinar we will discuss lifestyling strategies, their advantages and drawbacks as well as alternative approaches tailored to airline pilots. Scan the QR code to register your interest: Best wishes, Ryan Caunt, Business Owner & Principal Adviser Arjjun Gopal, Adviser Above & Beyond Lewington Wealth Management Ltd is an Appointed Representative of and represents only St. Jamess Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Groups wealth management products and services, more details of which are set out on the Groups website www.sjp.co.uk/products SJP Approved 3/3/2025 17/03/2025 14:08