Market volatility and your pension savings

WHEN you have money invested in a pension savings plan, sudden market volatility can be unnerving, to say the least. As in times of volatility, the value of investments can go down as well as up, so you may get back less than you invest. But whether retirement is a long way off or just around the corner, here’s some information you should consider. And remember, this information is not a personal recommendation for a particular course of action. If you’re unsure of the right approach for you personally, you should speak to a regulated financial adviser.

1. Your pension savings are an investment

When markets experience volatility, you may see fluctuations in the value of your pension savings. These are a normal part of long-term investing, as the value of investments can go down as well as up. Volatility was expected this year, with central banks beginning to change their monetary policies and interest rates on the rise. Further and ongoing volatility will prevail following the invasion and ongoing conflict in the Ukraine.

2. Take your time

During uncertain times, feeling fearful could lead some members to make rushed decisions about their pension savings, based on short-term circumstances. Some may think about selling or moving investments in the hope of minimising any loss, but this could have significant long-term consequences for your financial wellbeing and retirement, as you may miss out on any market bounce-backs.

So, think carefully, don’t make a rushed decision and consider talking to an authorised financial adviser before making any decisions.

3. If you’re close to retirement

If you’re approaching retirement, it’s likely that your appetite for risk has already reduced and you may have selected funds (such as a cash fund) to help to reduce the possibility of your retirement savings falling in value, just when you need to start using them. If you’ve already taken these steps, it means you should be able to ride out short-term volatility.

If you’re using a default investment option, and you’re close to your selected retirement age, your investment portfolio may already be set up to be invested in lower risk funds that may be less susceptible to market volatility. This is because, often default funds tend to be what are known as 'lifecycle' funds and they change where you are investing over the years, to aim to reduce investment risk as you get closer to retirement.

The key is not to take knee-jerk action, which is easier said than done. But it’s important to remember that market ups and downs are normal over the short term, and staying invested may mitigate the effect of any market falls, although this is not guaranteed.

If you want to do something, log into PlanViewer and check your retirement age to make sure it reflects your current retirement goals and plans. The retirement age is set automatically when you start saving into your retirement savings account, but you can choose a date that is right for you.

And whatever happens, don’t make a rushed decision. Remember, if you are unsure of the suitability of an investment or course of action, you should speak to a regulated financial adviser.