After turmoil in global stock markets, many are concerned about what it means for their retirement pots
There has been huge volatility in global stock markets within the past week following Donald Trump’s tariff regime, with many concerned about the impact on their pension.
Although Trump has now announced a 90-day pause on higher-band tariffs – with the exception of China – there are still worries about the longer lasting implications on retirement pots.
David Gibb, financial planner at Quilter Cheviot, said: “Stock markets continue to be incredibly volatile despite the announcement of a pause in ‘reciprocal’ tariffs by Donald Trump. This pause is only for 90 days so uncertainty is still very much present, and markets hate uncertainty.
“However, for pension pots, market volatility is a good time to assess where you stand and if you are taking the right level of risk for your circumstances.”
We spoke to experts about what the latest changes mean for your pension pot.
What should you do with your pension?
Those with defined contribution (DC) pension pots – the most common type – may see the value of their pension go down.
DC pensions are where pensioners save a portion of their salary every month into a pot which is invested for their retirement. When the stock market dips, the value of their pension can also fall.
However, experts have warned against making rash decisions given the changing environment.
Tom Selby, director of public policy at AJ Bell, said: “Predicting when stock markets will move favourably for retirement investors is a bit like nailing jelly to a wall.
“In reality, if you’re a long-term investor you shouldn’t really be distracted by market movements over the space of days or weeks – your time horizon should be years, if not decades. What will happen to global markets in the near-term will depend largely on the actions of the US President over the next 90 days.”
He said that given the rapid changes in the market, people need to maintain a long-term view.
“If stability is restored and tariffs are rolled back or cancelled, you’d expect markets to react favourably, whereas if Trump decides to dig his heels in or continue to act erratically things could take another grim turn.
“But provided you’re focused on the long term, none of this should materially impact on your approach to investing your pension.”
Those with DB pensions – also known as final salary pensions – will be largely unaffected by the changes in the stock market.
These pensions provide a guaranteed lifetime income based on your salary and years of service and are common in the public sector but not in the private sector. They are typically protected from inflationary rises as well.
Does it matter when you plan to retire?
For those who are tempted to change where their pension is invested or no longer contribute to their funds, experts say to carefully consider the implications.
Helen Morrisey, head of retirement analysis at Hargreaves Lansdown, said: “It’s important to remember that pensions are a long-term game and you need to take a long-term approach. Over the course of your time saving into a pension you will hit several periods where you will see market turbulence.
“Over time markets do recover. Taking knee-jerk reactions like changing investment strategy or stopping contributions risk crystallising losses which will make it harder for your fund to recover when things do settle down.”
However, depending on when people are planning to retire may depend on what they decide to do.
Selby said: “For those approaching retirement, particularly anyone planning to turn their pot into an annuity, the recent volatility is a useful reminder that you need to review your investments at least five years before you access your money to make sure they are aligned to your plans.”
Gibb added: “For those at or near retirement, considering the ways you take your retirement income would be a sensible thing to do – for example, use savings accounts or cash ISAs first in order to leave investments with as much time as possible to recover.
“Furthermore, for those with a much greater time horizon, it is a case of ignore the noise and stay patient. Markets do recover and have shown over many decades to be the best way to get inflation beating returns. Investing is a long-term exercise and this won’t be first or last market volatility that a pension pot sees.”
He suggested that those who have extra cash available may consider investing or drip-feeding money into the markets when prices have fallen, adding this “is a great way to take advantage of the volatility”.
He said: “Over a 20- to 30-year horizon of a pension pot, this could make a huge difference to your retirement.
“For those looking at annuities, then it is important to keep an eye on the rates offered. These are often tied closely to long-term gilt yields. These have been fluctuating of late as investors look to contend with slowing economic growth and the potential for higher inflation.
“Should interest rate cuts be needed and yields fall, annuity rates may also face downward pressure. For those considering converting pension savings into a guaranteed income, timing will be key. As ever, professional financial advice can help ensure retirement plans remain on track, even as the external environment shifts.”
