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Hargreaves warns over £165bn in lifestyle funds in wake of annuity shake-up

Hargreaves Lansdown says savers should be reviewing their investments in £165bn-worth of lifestyle pension funds after the massive shake-up of the annuity market announced in the Budget this week.

The Chancellor set out reforms which will see over-55s able to take their entire pension pots in cash from next April.

Hargreaves estimates three-quarters of pension default funds are invested in lifestyle strategies designed for people who buy an annuity.

It says the expectation savers will buy an annuity “now looks like a heroic assumption” for most savers.

Lifestyle strategies invest in growth assets during the start and middle part of indivduals’ careers before moving into lower risk assets as they near retirement.

Hargreaves head of corporate research Laith Khalaf says: “Absolutely everybody who is invested in a default fund in their company pension scheme should dust it off and take a close look at it; the fund may no longer be fit for purpose.

“This applies to pension plans set up with previous employers too.

“Likewise, every firm in the land should review their default strategy in light of the Budget.”

Worldwide Financial Planning IFA Nick McBreen says: “If people are in lifestyle strategies they have to ask whether it is still appropriate in this brave new world. It is a wake-up call for people to act but some of these old contracts may not allow them to leave.

“Providers will have a lot of problems incorporating these reforms into their businesses.”

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