Why has your pension dropped? Looking after your pension during uncertain times

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The performance of your pension can affect the value of your retirement savings. Discover what may have impacted your pension and the steps you can take to help get it back on track. 

If you’re unsure about the status of your pension, speak to a professional pension adviser.

Why have pensions dropped this week?

A pension is designed to help you save and invest for the future over many years. If you’ve noticed a recent fall in your pension value, you’re not alone. During periods of market volatility, many investments can experience sudden movements.

It is natural to focus on what has happened today or this week, but pensions are usually built around a much longer timeframe. Someone who is decades away from retirement may experience periods of market growth and decline before they need to access their money.

A fall in value only becomes a real loss if you sell investments when they are worth less than you paid. If your pension remains invested, there is the potential for markets to recover over time, although this is not guaranteed.

It’s important to remember that a pension is designed for the long term, so short-term market movements are only one part of its overall journey.

Why has my pension gone down?

There are many different types of pensions. Most workplace and personal pensions are invested to help your money grow over the years before you retire. This means your pension is usually invested across a range of assets, such as shares, bonds, property and other investments.

Because these investments are linked to financial markets, their value can change. When markets fall, the value of the investments held within your pension can also fall temporarily.

There are many reasons markets can become unsettled, including:

• Changes in interest rates
• Inflation concerns
• Political uncertainty
• Global events
• Economic news affecting investor confidence

The past few years have brought several challenges for pension savers. Events such as Brexit, the Covid-19 pandemic, the conflict in Ukraine, political uncertainty and changes in global trade policies have all contributed to periods of market volatility. More recent events, including ongoing tensions in the Middle East, may continue to influence investment markets.

These events can cause market prices to move quickly, which can affect pension values in the short term. While this can feel worrying, market ups and downs are a normal part of investing.

If you have a workplace pension, personal pension, or a combination of both, you may have seen the value of your pension savings rise and fall as markets respond to these global affairs.

My pension is losing money, what should I do?

If you are asking “my pension is losing money what should I do?”, the first step is not to panic or make rushed decisions.

When markets fall, it can be tempting to move your pension into lower-risk investments or stop contributing altogether. However, making decisions based purely on short-term market movements can sometimes work against your long-term goals.

Before making any changes, consider:

Check how your pension is invested

Your pension provider can usually tell you where your money is invested and what level of risk you are taking.

Different funds are designed for different needs. For example, someone with many years before retirement may have a different investment approach with a higher tolerance to risk from someone who plans to access their pension soon.

Keep your long-term goals in mind

A pension is not usually designed to be accessed immediately. If retirement is still many years away, short-term falls may have less impact on your overall retirement outcome than they appear to today.

Regular pension contributions can also mean you continue investing during market downturns, potentially buying investments at lower prices. However, the value of investments can go down as well as up.

Avoid market predictions

One of the most common reactions during uncertain periods is to try to predict when markets will recover. The difficulty is that nobody knows exactly when markets will rise or fall.

Moving out of investments after a fall could mean missing out if markets recover. Similarly, moving investments without understanding the risks may not suit your retirement plans.

Is my pension safe?

This depends on the type of pension you have and how it is structured. A pension is not usually held as cash in a bank account; it is invested with the aim of helping your money grow over time.

Investment values can fluctuate, so there is always some level of risk. However, pensions are designed with long-term saving in mind, and providers use different investment strategies to manage risk.

If you have concerns about your specific pension, it can help to understand:

• what type of pension you have,
• where your pension is invested,
• how far away you are from retirement,
• whether your current investment approach matches your plans.

As always, managing uncertainty is an important part of long-term investing, with approaches such as smoothing mechanisms designed to help reduce the impact of short-term market movements for certain investments.

What should you avoid doing when your pension falls?

When markets are unpredictable, it can be easy to make decisions based on worry rather than your long-term plan. Try to avoid:

Making sudden changes without understanding the impact

Switching investments or withdrawing money during a market downturn could affect your future retirement income. Before making changes, consider whether the decision is based on your personal circumstances or simply a reaction to current headlines.

Checking your pension value too often

Unlike a savings account, a pension investment value can move up and down regularly. Checking every day can make normal market movements feel more alarming than they are.

Looking at your pension alongside your wider retirement plan may give you a more useful picture.

Stopping pension contributions unnecessarily

Pausing pension contributions may reduce the amount you build up for retirement. If you are struggling financially, it may be worth reviewing your options, but stopping contributions because of short-term market falls may not always be the right choice.

When should you seek financial advice?

Although market fluctuations are normal, there are times when professional financial advice can be helpful. You may want to speak to a financial adviser if:

• you are approaching retirement,
• you are unsure whether your investments match your goals,
• you are considering taking money from your pension,
• you have experienced a significant change in your circumstances,
• you are worried about the level of risk you are taking.

A financial adviser can help you understand your options and create a plan based on your own circumstances.

Why it’s important to keep perspective during uncertain times

Seeing your pension value fall can be uncomfortable, but short-term market movements are part of investing. A temporary drop does not automatically mean your pension is failing or that you need to take action immediately.

The most important thing is to understand your pension, stay focused on your retirement goals and make decisions based on your personal circumstances rather than market headlines.

If you are concerned about why your pension is going down, reviewing your pension arrangements or speaking to a financial adviser can help you feel more confident about your next steps. Alternatively, request a callback today.