Market fluctuations and your pension investments – here's what to consider

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MoneyPlus Features Team

August 10, 2022

4 mins read

When stock markets and other investment markets are fluctuating it’s natural to worry about how this may impact your pension and other investments. But reacting in the short term could worsen any losses. It’s important to step back and consider what you can control. We guide you through some of the key points. 

It’s unsettling to see the value of your pension fall because of market turbulence. At such times, it’s important to remember that it’s natural for stock markets and other investment markets to move up and down (often referred to as volatility) due to major economic and political events. And importantly, they tend to recover over time. Do be aware, though, that past performance is not a guide to future performance. 

Download our chart to see an example of market volatility in action. You can see what would have happened if you’d invested £10,000 in the FTSE® All-Share Index on 31 December 1985 to 31 May 2022. It’s a bumpy journey with several big events prompting notable downs and ups.

What about your £10,000? Well if you held onto your investment after the big falls, its value would have bounced back over time and be worth over £200,000. But if you’d sold, you would have lost the chance to benefit from future growth. 

So while we can’t use past performance as a guide, it does help to show that the longer you’re invested for the more likely you are to reap the rewards. 

Of course it’s one thing to look at a chart like this and gain perspective in relative calm, quite another when headlines are worrying and your investment is falling in value. But it’s exactly those times when it’s crucial to focus on what will help you make informed decisions about your money. Here are some things to think about.

Think longer term

History has shown that over the long term (usually more than 10 years) markets have risen in value. So consider how your investment has done over the longer term, rather than focussing on short-term falls. 

React and you may regret it

If you panic and sell, you’re likely to be selling after markets have already fallen and importantly, before they rise again. That means you’re not only locking in your losses but also missing out on the eventual recovery; so you’re feeling the pain of loss twice. 

You may wonder why not get out when things are bad and just get back in when they improve? But if you didn’t expect the fall, would you know when the recovery is coming? Even professionals, with all sorts of data and analysis to hand, can’t always ‘time the markets’ – it’s incredibly difficult to do. 

Check where your pension is invested

If you’re in one of our low involvement pension options then it’s likely that your money is being spread across different types of investments and countries, as this can help smooth out the returns you get. This is because different investments tend to go up and down in value at different times and are affected in a variety of ways by factors such as economics, politics and conflicts. This is known as “diversification”, our diversification guide explains more. However, if you select your own investments, you might want to check the assets you’re invested in. 

If you have a Standard Life pension plan, you can check the value of your plan by logging in or registering for online services.

Has your attitude to risk changed?

If you’re uncomfortable seeing large movements in the value of your plan, you might want to consider lower risk investment options in the longer term. Most options have some sort of rating that can give you an indication of how much your option may move down and up in value. You can learn more about investment risk, or it may help to take our risk questionnaire.

What are your circumstances?

You should consider all these factors in relation to your own circumstances. For example, you might be some way from retirement, about to access your pension money for the first time, or already taking money from your pension plan.

Seek advice if you need to

It’s a big decision to make changes to your pension plan and it could impact how much you’ll have in the future. So you may want to take professional advice before making any decisions. If you don’t have a financial adviser, you can find a list of advisers on the FCA websiteUnbiased is an independent site that can help you find the right adviser for you. There’s likely to be a charge for any advice you receive. 

The information in this article should not be regarded as financial advice and is based on our understanding in July 2022.

Remember that the value of pension plans and other investments can go down as well as up and you may get back less than was paid in.


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