Investment options explained Updated for 2026/27

Every workplace defined contribution (DC) pension comes with investment choices attached, even if you've never actively made one. The vast majority of savers never change their fund selection at all, relying instead on the scheme's default fund to do the job for them — and for most people, most of the time, that's a perfectly reasonable approach. But it's worth understanding what the default fund actually does, how it changes as you approach retirement, and when choosing your own funds might genuinely suit you better. This guide covers all of that: what default funds typically invest in, how "lifestyling" works, the main alternative fund categories most providers offer, and how to check or change your own selection if you decide to.

The default fund — and why most people stay in it

Every workplace pension scheme used for auto-enrolment must offer a default fund, designed to be reasonable for the average member who doesn't want to make active investment decisions. Because the vast majority of people are automatically enrolled without choosing a fund themselves, the default is deliberately built to be broadly appropriate for a wide range of people and risk appetites — not too cautious to miss out on growth over a long career, and not so adventurous that it exposes the average saver to more risk than they'd want. Regulators require default funds to meet certain standards on charges (a charge cap currently set at 0.75% a year for the default fund used for auto-enrolment contributions) and governance, which is part of why staying in the default isn't a sign of disengagement so much as a reasonable, low-effort default choice for most savers.

What default funds typically invest in

Default funds are usually diversified, meaning they don't put all your money into one type of asset. A typical default fund holds a mix of company shares (equities) from around the world for growth potential, government and corporate bonds for relative stability and income, and sometimes a smaller allocation to property or other assets for further diversification. The exact mix depends on your age and how close you are to retirement (more on this below), but the underlying principle is the same across most providers: spreading risk across many different companies, sectors, countries and asset types, rather than depending on the fortunes of any single investment.

Lifestyling: automatically reducing risk as retirement approaches

Most default funds use a strategy often called "lifestyling" or a "lifestyle strategy." In the earlier decades of your working life, when retirement is a long way off and there's plenty of time to ride out short-term market ups and downs, the fund typically holds a higher proportion of shares, which historically have offered greater growth potential over long periods, albeit with more short-term volatility. As you get closer to your selected retirement age — often starting somewhere between five and ten years beforehand — the fund gradually and automatically shifts a growing proportion of your pot into lower-risk assets such as bonds and cash. The idea is to reduce the chance of a sudden market fall wiping out a large chunk of your pot in the final few years before you plan to use it, when there's less time left to recover from a loss.

It's worth checking what your own scheme's lifestyling strategy assumes about how you'll take your money at retirement — some default funds are still built around the assumption that you'll buy an annuity, shifting heavily into bonds and cash, while others (increasingly common since pension freedoms) are built around the assumption you'll keep the pot invested and draw down from it gradually, which implies staying a bit more invested in shares for longer. If your own retirement plans don't match what your scheme's default assumes, it's worth reviewing whether the default lifestyling approach still suits you, or whether a different fund is a better fit.

When choosing your own funds might make sense

Staying in the default is entirely reasonable for most people, but some savers choose their own funds instead, usually for one of a few reasons:

• 1

  A different appetite for risk — you may be comfortable taking on more investment risk in pursuit of potentially higher long-term growth, or conversely prefer a more cautious approach even if it means accepting lower expected returns.

• 2

  Ethical, environmental or social preferences — many providers now offer ESG (environmental, social and governance) or ethical funds that exclude or favour certain sectors and companies based on specific criteria.

• 3

  Religious requirements — Sharia-compliant funds are widely available and invest according to Islamic finance principles, avoiding interest-bearing instruments and certain sectors.

• 4

  A longer investment horizon than the default assumes — for example wanting to stay invested in higher-growth assets for longer because you plan to keep working, or don't plan to access the pot immediately at your stated retirement age.

• 5

  Consolidating a broader investment strategy — some people prefer to align their pension investments with other savings and investments they hold elsewhere.

Typical fund risk categories

Most providers offer a range of funds beyond the default, generally falling into a handful of broad categories. The table below is a general guide — exact fund names and precise risk levels vary by provider, so always check a fund's own factsheet before choosing it.

A higher expected return generally comes with higher short-term volatility — the value can fall as well as rise, sometimes significantly, over shorter periods. This is why the right fund choice depends heavily on how many years you have until you plan to access your pot, as well as your own comfort with seeing its value fluctuate along the way.

How to check or change your fund choice

Almost every workplace pension provider offers an online portal or app where you can see your current fund holdings, their recent performance, and the option to switch. Log in (your provider will be named on your payslip or annual statement if you're not sure who they are), navigate to the investments or fund choice section, and you'll typically be able to view fund factsheets covering each option's objective, risk rating, historical performance and charges before making a change. Switching funds is usually free, though it can sometimes take a few days to complete as existing holdings are sold and new ones bought. If you're unsure what's right for you, providers often offer basic risk-profiling questionnaires to point you towards a category, though for anything more tailored, regulated financial advice is the appropriate route rather than guessing.

If your workplace pension is run through a master trust such as NEST, The People's Pension, Now Pensions or Smart Pension, see our guide on master trusts for more on how these large multi-employer schemes are structured and regulated.