Defaults, targets and one-day cricket

13 July 2015
OK, show of hands please. Who has ever thought of cricket and default funds at the same time?

If you have, you’ve probably been tasked with the idea of writing a blog that links the two like me! With all the current focus on Freedom and Choice I’ve been thinking a lot about how this impacts default funds and in many ways, it’s a lot like targeting a moving run chase in a rain-affected cricket match.

Chasing targets

In fact, cricket is a great analogy to use when talking about investment strategies. Take one day cricket, it's all about racking up the highest score you can get over one day and beating the  opposition's total. We’ve had some pretty epic scores lately with the highlight being England’s highest-ever run chase of 350 against New Zealand.

Now, I’m not suggesting that default funds are suddenly all going to go gung-ho and wield off the sixes but in the accumulation phase of pension saving, it’s always been about building the maximum pot over the course of an investor’s innings (relative to their risk profile of course).  

You still with me? Well with default funds, it’s always been about targeting a default outcome, which has typically been an annuity purchase. Now, Freedom and Choice has blown all of that wide open and we can no longer make that lone assumption. That makes it harder for advisers looking to set up new schemes and also review existing schemes.

Drawdown, cash, annuities: they’re all viable options as default outcomes but the problem is that if we don’t know what members want when they retire, what outcome should defaults target? It’s a bit like a rain-affected cricket match. You set off with a strategy batting towards a total that will win you the game. It then rains and you need to adopt a different strategy to achieve the new outcome.

Default funds have now become much more outcome-focussed with added emphasis on what it’s targeting, how you get there and having the flexibility to react and adopt a different strategy if circumstances change.

Our default

Take our default solution and general all-rounder; Balanced Lifestyle Strategy (Pension & Cash). It’s available off-the-shelf targeting an annuity purchase. Alternatively, you can tweak the target outcome to either cash or drawdown if one of those is more appropriate for the membership of the scheme. This can be done at initial set-up or when reviewing it. We’ll even automatically transfer existing members as well as new members on a negative affirmation basis if you want to change it.

The three strategies all share a similar asset allocation journey until five years before the retirement date. At that point, each strategy takes off on their own unique asset allocation strategy with the aim of delivering a gradual run chase to the client’s desired outcome.

So by choosing a default solution with room to tinker and target different desired client outcomes, you too can react to changing run totals and alter the strategy right up until retirement and the end of the accumulation phase of the retirement game.

So next time you are considering a default fund spend some time watching cricket. After all, the Aussies are in town this summer so you'll have plenty of opportunities…

About the author

Ryan Medlock

Investment Proposition Manager

Ryan’s remit includes speaking investment matters at adviser events, regularly contributing to Royal London websites and trying to beat his colleagues in the fantasy fund manager competition.

Last updated: 25 Mar 2016

This website is intended for financial advisers only and shouldn't be relied upon by any other person. If you are not an adviser please visit

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London EC3V 0RL.