6 hours ago
There is a lot of upheaval and uncertainty in the world right now, and this affects every aspect of our lives. Pensions may not be the first thing that comes to mind, but during times of conflict, I often receive messages asking about the potential impact of stock market turbulence on pension values and whether any action should be taken.
It can be worrying when you check your pension and see it has decreased in value. You might consider making changes, feeling that this gives you some control during turbulent times.
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While I don’t have a crystal ball and cannot predict the future, what I can say is that pensions are a multi-decade investing journey that requires a long-term approach.
In my own pension saving experience, I have lived through several periods of significant stock market turbulence, including the 2008 global financial crisis, the pandemic, the Russia/Ukraine conflict, and more recently, Trump’s tariffs. All these crises affected pension values, but over time, the markets and pensions recovered.
Making knee-jerk reactions such as changing investments or cutting contributions can do more harm than good.
If you change investments during a downturn, you risk crystallizing your losses by selling near the market bottom and missing out on the recovery.
By continuing your contributions, you can buy more units in your investments at lower prices, which helps you recover more quickly when the market rebounds.
Stopping or reducing pension contributions will extend the time it takes for your pension to recover. In short, if you have regular contributions set up and are in the growth phase of saving for retirement, the best action right now is actually to do nothing.
If you are approaching retirement, you may be more concerned about the impact since you might soon start drawing an income from your pension. In this case, first check if you are invested in a lifestyling fund.
These funds gradually shift your investments from equities into lower-risk assets such as bonds in the final years before retirement to protect your pension from stock market volatility.
If you are in such a fund, you may find that your pension has not been affected as much as you feared, and you might have been worrying unnecessarily.
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