Pension-stock Market

It’s always important to be aware of how your pension is working for you, especially in times of market uncertainty. Like any investment, the value of your pension will rise and fall as a result of each day’s trading, including economic and political developments across the world. There’s no guarantee that you’ll get back the amount that’s been invested. One common theme is that no one likes uncertainty, especially investors.

But uncertainty has always been a feature of investments. Throughout history, large scale events have caused drastic market behaviour.

You may remember the stock market crash in 1987…

…the after-effects of September 11 2001…

Or the Financial Crisis in 2008. And more recently, stock markets around the world fell sharply in March 2020 at the outbreak of the Coronavirus pandemic.

But if you take a look at the stock market over the long term, you’ll see that it resembles something more similar to a mountain range than a downward curve, as the world’s markets have fallen and then recovered.

Whenever a major event occurs, we know how easy it can be to get caught up in the media attention.

But it’s worth remembering not to base any long-term savings decisions on short-term events.

Your pension has been designed for decades of investment ups and downs, not just for the events of the moment.

Historically, many patient investors have been rewarded by long-term stock market returns, despite occasional periods of volatility. Please be aware that past performance is not a guide to future performance.

If you choose to take your money out of the market, and so
investments, to protect it during a stock market crash, you’re effectively accepting any losses you’ve made at that point, and you could miss out on any increases in the future should markets recover.

If you continue to contribute a regular fixed amount into your pension, this may help smooth out the fluctuations in your pension pot’s value - as well as helping you to save effectively towards your retirement.

This is because when you make a contribution, you buy units in a fund. The lower the unit price for the fund, the more units you’ll get for your money.

If and when the unit price of the fund rises, fewer units will be purchased, but the value of the units you already own will go up. So, while the value of your pension may go down in the short term, by continuing to contribute to your pension, you could end up with more when the value of your units goes back up.

As an Aviva pension customer it’s likely that your money will be invested in a number of different types of assets – and not entirely in assets which are traded on the stock market. This is done to reduce your exposure to the ups and downs in markets, which may occur.

And if you’re invested in one of our default investment programmes, your savings will gradually be moved into lower risk assets as you get closer to your selected retirement age.

This means that sudden ups and downs in the stock markets will have a lesser overall effect on the size of your pension pot at a stage when there’s not so much time to regain any losses.

So if you’re thinking about making a change to your pension based on what’s happening in the markets at the moment, take your time and consider your options.
If you want more help thinking about pensions and retirement, a good place to begin is MoneyHelper, the government-backed free guidance service.

If you are over 50 you can use the Pension Wise service, from MoneyHelper, online or by phone on 0800 138 3944. They offer a free face to face or telephone guidance session. They won’t tell you what you should do, but they’ll provide you with information to help you understand your options.

For more tailored advice, you should speak to a financial adviser. Bear in mind they may charge a fee for this advice.

If you don’t have an adviser, you can find an up-to-date list of regulated advisers at MoneyHelper www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/find-a-retirement-adviser
You can access MoneyHelper online at www.moneyhelper.org.uk or by phone on 0800 011 3797.