How the stock market impacts on your pension?

How the stock market impacts on your pension?

Transferring out of a Final Salary scheme is unlikely to be in the best interests of most people.

The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.

It is common for stock markets to go through both good and bad patches as Pensionlite adviser Tom Williams explains.

Most pension funds are invested in a range of assets to minimise your exposure to risk. A typical pension fund is likely to include a mixture of assets such as property, fixed interest, UK and global equities to name a few.

Generates diversity

The majority of these assets are traded on stock markets so when the markets are strong a pension can perform well, and when the markets are weak a pension investment can perform not so well. One of the main benefits of investing in many different assets is that it generates diversity.

Whilst it can be difficult to foresee market declines it is important to remember that a pension is a long term investment designed to fund you through retirement.

Investing in a diversified portfolio essentially enables you to spread the risk you are taking. Spreading risk is an important aspect of investing, by taking this approach, even if a particular asset class experiences short term declines, the rest of your pension may experience gains.

For example, following current uncertainties in the market such as Brexit, US trade wars with China, markets have tended to fall. Whilst some share prices have fallen others have risen. A pension is a long term investment and therefore short term declines shouldn’t cause too much concern especially if you still have years to go until retirement.

Regular reviews

You should regularly review your pension investments, at least on an annual basis to ensure that you are still comfortable with the level of risk you are taking in terms of how your pension is invested and that it is on track to meet your retirement income needs.

This becomes even more important as you edge closer to retirement to try and maintain, or hopefully continue to increase, the value of your fund in the last few years before you actually retire.

If you would like to speak to Tom or any one of our experienced financial advisers then contact the team on or call 01952 279 379