What to do when volatility strikes
Volatility describes periods of unpredictable, and sometimes sharp, market rises and falls. It's natural, but unnerving. Let us guide you.
Whatever you do, don't panic
The value of investments rise and fall for all sorts of reasons - interest rate hikes, geopolitical changes, company announcements... the list goes on. And while these movements - otherwise known as volatility - might make you feel uncomfortable, they're part and parcel of investing.
Looking after your pension during volatility
Stay focused on the long term
Markets can - and have - recovered over time (although there are no guarantees). Look at long term projections instead of current performance.
Avoid making rash decisions
If you're over 55 (57 from 2028) and thinking of withdrawing money in the hope of minimising losses, this could be risky as it might mean missing out on any potential future gains.
Keep some cash set aside
Make sure you have money set aside for emergencies. This way you won't be forced to withdraw from your Plan, which is designed to prepare your after work life.
Review your investment strategy
If your pension isn't in the default strategy, check your own strategy is still in line with your goals and objectives.
Seek guidance or advice
Our website has plenty of useful guidance that can help you. You can also talk to a financial adviser for reassurance.
Time to recover - why it pays to stay invested
Investing is for the long term. Setbacks happen, but history shows that markets have recovered. Here's what happened if you invested £100 each month in the FTSE 100 - and stayed invested - since January 1986.
Source: Bloomberg, 29.03.24 based on the FTSE 100 on a total returns basis with dividends reinvested. The FTSE 100 is the benchmark index of the UK stock market, tracking the permanence of the 100 largest companies listed on the London Stock Exchange.
Five-year performance table
| (%) As at 31 Dec | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|
| FTSE 100 | 17.3 | -11.6 | 18.4 | 4.7 | 7.9 |
Past performance is not a reliable indicator of future returns.
Source: Refinitiv, total returns in local currency as at 31.12.23.
When the value of your pension pot falls or you're feeling financially squeezed (whether that's due to the cost-of-living crisis, you're saving for a house, having a baby or thinking about changing career), it can be tempting to lower your pension payments. Or worse, stop them altogether.
But if you're going to be able to afford the retirement you want, you might want to think again. Your future self will thank you for keeping at it in the long run.
Nearing retirement?
When you get close to retirement, any sudden change to your pension value can be worrying. The impact of inflation can also be daunting. It's important to think through your options and, if possible, speak to an authorised financial adviser.
If you're close to your selected retirement age, your money may already be set up to be invested in lower risk funds that may be less susceptible to market volatility. This is known as a 'lifestyle' strategy, aiming to reduce investment risk as you get closer to retirement, with safer investments. The level of the risk can be higher in volatile markets, during periods of unpredictable and sometimes sharp price and interest rate movements, which means that the value of your investments can fall in value dramatically during those periods.
What you can do now:
If you're worried about the level of risk you're taking with your money, what you can do first is check your retirement age to make sure it reflects your goals. The retirement age is set automatically in PlanViewer when you start saving into your Plan, but you can choose a date that is right for you.
If you're approaching retirement, you might want to make sure your investment strategy still reflects your goals and the level of risk you want to take.
What you can do now:
You may want to consider if and/or when you'd like to invest in funds with a lower level of risk, such as a cash fund (although please be aware that cash investments can still fall in value over time due to inflation and charges/fees). Reducing the risk reduces the possibility of your retirement savings falling in value just when you need to start using them. But remember, the value of your investments can always go down as well as up.
Transfer your pension
If you've built up several pension pots over the years, you might find it easier to manage them in one place.