Market fluctuations and your pension investments – could patience be rewarded?

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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. Our short video explains some of the main things to think about when markets are moving and how this could affect the value of your pension investments. We also guide you through some of the key points below.

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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 normal for stock markets and other investment markets to move up and down, often referred to as volatility. This can be due to economic and political events. And in the past, they’ve shown that they can recover over time, though past performance can’t be taken as a guide to future performance. 

Imagine you had invested £10,000 in the FTSE® All-Share Index on 31 December 1985. To give you an idea of how much this was worth at the time, the average UK house would have cost a little over £30,000, according to the Land Registry.

The investment would have had a bumpy journey over the period to 6 August 2024, with several big events – including the September 11 attacks in 2001, 2008’s global financial crisis and the coronavirus pandemic – prompting notable downs and ups. Click here to see a visual representation.

How would the value of the investment have changed? Well, if you held onto it after the big falls, the value would have bounced back over time and it would be worth over £250,000. But if you’d switched out of it, you could have lost the chance to benefit from its future growth. 

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

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Of course, it’s one thing to think about figures like this and gain perspective in relative calm, but it’s quite another when headlines are worrying and your investment is falling in value. 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 focusing on short-term falls. 

React and you may regret it

If you panic and sell, or attempt to take advantage of shocks in the market, you’re likely to be selling after markets have already fallen and importantly, before a potential recovery. So you’d be accepting your losses.

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” and our diversification guide explains more. However, if you select your own investments, you might want to check where you're invested. 

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 they may move up and down in value. You can learn more about investment risk here, 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 financial advice before making any decisions. You can find out more about choosing a financial adviser on MoneyHelper.

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The information in this article should not be regarded as financial advice and is based on our understanding in October 2024.

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.