How to help your pension fund weather the ups and downs of markets

Investors may be concerned about recent market ups and downs as a result of world events.

If that sounds like you, Emma-Lou Montgomery, associate director at Fidelity International, suggests there might be some things you could consider.

For those who still have a long way to go towards retirement, she says, “You should think of your pension as a long-term savings pot, and periods of volatility or high inflation shouldn’t change the way you save for your pension. If you are able, continue to contribute as you normally would.

Many pension plans have a “target” for when people are expected to retire. This often means that people’s funds are often shifted to less risky investments as they approach retirement age.

You can start thinking about your retirement, whatever your age. Photo: Alamy/PA

Montgomery says, “If you’re nearing retirement, chances are you’ve already seen your appetite for risk diminish. You could hold a higher level of cash and have fewer volatile assets than a few years ago.

“It’s a smart move because it means you should be able to ride out short-term volatility and leave the rest of your investments where they are.”

She suggests that those who sell falling assets risk locking in their losses – rather than staying invested and waiting for the turmoil to run its course. Montgomery adds, “It’s easier said than done, but the key is not to take instinctive action.”

For those about to retire, she says: “We are also likely to see higher levels of inflation for some time. It’s a good time to think about your retirement plans and factor in the higher cost of living with what you can afford.

“You may have to juggle some of your plans or stop taking money from your pension for a short time. But be sure to review this regularly, as your financial situation may change.

If you’re already retired and earning income from your investments by withdrawing money, Montgomery suggests, “It may be a good idea to temporarily reduce the amount of income you’re getting right now, when the moves of the market are potentially more exaggerated than usual.

“If you can get through the short term doing very little with your investments, you have a good chance of benefiting from the eventual recovery and getting out of it without volatility hitting your capital.”


Retirees worry about their long-term ability to survive…

She says annuity rates – giving people a fixed retirement income – have recently increased, which could also be a factor to consider.

Montgomery adds, “A combined withdrawal and annuity strategy can work well in volatile times, giving you the assurance of guaranteed income, as well as the ability to stay invested and profit when the market turns.

People may want to consider getting independent financial advice and shopping around when considering their retirement options.

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