The use of "lifestyling" in UK group money purchase pension schemes has more than doubled in the last two years. According to a survey conducted by consultants William M Mercer, the continued growth of "lifestyling" could help lessen some of the concerns that money purchase schemes will deliver insufficient income in retirement. This lifestyle approach looks set to overtake the domination of with-profit funds. Although the growth of money purchase schemes in the UK has been slow –only representing 15% of large company schemes - the trend is likely to accelerate.
In 1998, 41% of schemes provided a lifestyle investment option compared to just 28% in 1997 and 17% in 1996. These investments are usually equity-based and potentially higher performing than the more conservative funds often chosen by individual members.
The schemes make benefit projections available to members, which can be an effective tool for them to understand the contribution levels needed for a target level income
Mercer’s survey reflects that the majority of money purchase schemes include a good level of risk benefits at considerable extra cost to the employer, though a significant number of schemes still provide inferior cover to the average final salary scheme.