Scottish Widows is to move away from lifestyle investments for workplace pension default funds and plans to bulk-switch savers into options more appropriate for income drawdown in retirement.
The provider plans to switch all savers currently using workplace default funds away from lifestyling before the end of the year.
It explained lifestyle investment strategies are geared towards converting savings into an annuity purchase at the point of retirement.
However, pension freedom, launched in April last year, opened up the retirement income market, giving more people the option not to buy an annuity with their retirement pot. Drawdown has surged in popularity since the reforms came into force.
Scottish Widows said just 25% of people planned to buy an annuity at retirement and, therefore, it will move savers into a default fund targeted at flexible access in retirement.
It explained under the lifestyling approach, pension funds are typically invested in riskier, higher growth assets when the saver is young, but progressively moved to less risky investments, such as cash or fixed interest, five to 15 years before retirement.
However, the provider said research has found only a quarter of people plan to take an annuity making lifestyling "unsuitable for the majority of savers".
The firm said anyone who still plans to buy an annuity or fully encash their funds can opt out and will be assigned an appropriate investment.
People who are within five years of retirement will remain in their current default fund unless they opt to switch, it added.
Scottish Widows pensions director Ronnie Taylor said: "For customers to make the most of the new freedoms, they really need to think about the way they want to use their pension fund in later life at least five years before their retirement date and ensure they pick an investment glide path to accommodate it.
"But despite our best efforts to draw attention to the issue, many customers remain disengaged and, where this is the case, we believe it's important and in their best interests to take action on their behalf."
