TPR calls for lifestyle strategies to be reviewed

Louise Sivyer -TPR

Louise Davey, acting head of policy at TPR has written a blog to coincide with the PLSA investment conference, “Trustees must not lose focus on protecting members from economic volatility”

Indeed they shouldn’t.

we remain determined to ensure trustees do not sleepwalk into a defined contribution (DC) crisis for savers approaching retirement.

Sadly that is precisely what has happened to thousands of DC schemes that ran lifestyle programs through 2022 to the present day which had

  1. 100 of the accumulated fund swapping into bonds
  2. Made no allowance for the predilection of DC savers to take 25% tax-free cash
  3. Advertised such strategies as “low risk” or “de-risked”.

TPR knows this and it knows that we are now in the “benefit statement season” where the bad news gets delivered.

Louise Davey is keen to point out that elderly savers who see up to 35% of their savings wiped out , may feel a little fragile.

We issued a clear message in January that savers must be supported amid concerns the value of some DC pots has fallen. That message remains just as relevant today.

So today I am once again calling on DC trustees to use our guidance to protect savers who are close to retirement and could be impacted depending on the investment strategy of their scheme. These are the savers with the least time to make up losses.

Too late! The horse has bolted leaving the stable full of manure.

The blog references the clear signals available to DC trustees that interest rates were rising in 2022. Few DC trustees took any more action than DB trustees took over LDI.

What can be done?

I took the opportunity yesterday to ask Nest’s new CIO, Elizabeth Fernando what can be done for those in their maturity and in a lifestyle program.

I am 61 and have two pots, one big one and a small one (which is in Nest). I was asking for a friend (BTW- Nest’s 2% contribution charge doesn’t apply to transfers-in).

The answer (not advice apparently) was to invest in a balanced fund – diversified into private markets as well as listed securities, with investments in property and infrastructure to boot.

I look forward to finding out more as I explore the pre-retirement fund options available at Nest.

But Fernando told the room that like everybody else, they ran target dated lifestyled funds for the 99% of savers who don’t make a decision. She admitted that these had been advertised as low-risk and she accepted that for savers, bonds can be high risk.

I wonder if she’ll be getting a call from Louise.

My way out of being lifestyled into bonds in 2022 was to push my lifestyle back at the end of 2021- it is now targeting my 75th birthday and happily I am largely invested in a growth strategy, but I suspect I’m the 1 in 100 who doesn’t rely on the default.

Nest admit they got caught out last year, so did everyone else. Low risk funds that lost people 10 to 30% of their savings were so commonplace that only a handful of master trusts came close to delivering a positive return.

The task – as Lou Davey goes on to point out in her blog, is to find a way to get people’s savings back. With bond yields still  above 4%, that looks a hard ask unless a default unwinds the lifestyle and puts people like me back in growth assets.

That’s the task facing DC trustees and indeed the providers behind workplace GPPs. I see precious little happening to suggest DC mature DC savers are gong to be any better off in 2023 than 2022. I look forward to hearing to the contrary over the next couple of days, but more in hope than expectation.

It’s only DC you see.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions and tagged , . Bookmark the permalink.

1 Response to TPR calls for lifestyle strategies to be reviewed

  1. Derek Benstead says:

    The headline of TPR’s article is “Trustees must not lose focus on protecting savers from economic volatility”.

    Of course, savers are protected from economic volatility by being members of a defined benefit scheme. Pity then that TPR case managers have so often discouraged benefit accrual in DB schemes in their interactions with trustees and employers.

Leave a Reply