Market movements and your retirement savings

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We know there’s been lots in the news about market moves recently, which can be a concern if you’re closer to taking your retirement savings.  While we’ve looked generally at how market fluctuations can affect pension investments before, this time we’re focusing on what they might mean if you’re accessing your pension pot, or planning to soon.  

A quick checklist

If you’re accessing your pension pot, or you soon will be, here’s a handy checklist to help you understand what market movements could mean for you: 

1. If you use a financial adviser, talk to them about the investments you have, the retirement options you’re planning to take or are already taking, and the current conditions. If you’re over 50, you can also get free impartial guidance from Pension Wise, a service from MoneyHelper. 
2. Check what you’re invested in. Is it designed to help shelter your money from significant volatility, especially in the early years of your retirement? Is the money you need in the short term invested in lower-risk investments? 
3. Keep checking that the money you’re taking is likely to last as long as you need it to.  
4. If you’re in the right investments, try to avoid making any rash decisions during short-term market falls. 
5. Set a date a few months from now to review your position and make sure you’re still on track. 

A more detailed view

The most recent ups and downs are taking place as investors react to US President Donald Trump’s new policies on international trade and consider what they mean for countries, industries, companies and economic growth. It’s difficult to predict how long the moves might continue, but below we list some points to think about while they’re ongoing. If you use a financial adviser, they should also be able to explain what these movements mean for your own specific circumstances.

Be prepared! Learn what could affect your pension pot’s value

If you understand the risks that could lie ahead then you can make sure you’re properly prepared. 

1. Inflation and living longer mean you need growth

For some people, leaving your money only in money market instruments (including cash) could be a risk when it comes to having enough income to keep up with the cost of living and last the length of your retirement – which is an unknown. And the reality is that many people underestimate how long they’re going to live.

The need to grow our money in retirement is an important reason why people who want to take a flexible income decide to leave their money invested, rather than put it in a bank account. While your money is generally secure in a bank or building society, it may not offer the growth you require. But there are risks involved with investing, too. If you stay invested, make sure you’re aware of those described in points two and three below. 

2. Withdrawing income in falling markets can make your pension savings run out faster

Different investment types can perform in different ways. When markets fluctuate, some types are more affected than others. If you take money out of a higher-risk investment when the markets have fallen, it could lead to your pension pot running out faster. This is because taking a flexible income often involves withdrawing a fixed amount at regular intervals, a bit like paying yourself a salary in retirement. If the value of your investments drops then that fixed amount becomes a larger proportion of your overall pot. You also lose out on the possibility of future growth if the market recovers.

3. Big falls in the early years of retirement can reduce how long your pension pot will last

If the value of your investments falls in the early years of your retirement, it could dramatically reduce how long your pension pot will last. This is because it’s much harder for the investments to catch up when you’re no longer paying any more in. 

But do try not to panic. If you’re approaching or in the early years of retirement, you may be invested in an option that’s designed to manage the potential impact of market volatility, although your plan may still have seen its value fall. If you’re a Standard Life customer and you’d like to check where you’re invested, you can do so on our app or online. You can find out more about our online services on our website. Or you can visit our support page for FAQs and ways to get in touch. 

You can also learn more about investment risk here, or it may help to take our risk questionnaire. 

What are some ways of managing these risks?

Managing how much investments move down as well as up in the early years of your retirement is very important, as it can ‘make or break’ your pension pot.  

There are a number of different investment strategies that can help you do this.  One of these is to have a mix of carefully managed growth and lower risk investments for your short- and longer-term needs. 

So with this approach your money would go into: 

• lower-risk investments for spending today – to help protect against the early years risk we mention above 
• medium-risk investments for the longer term – so the money you’ll need in the future has the chance to grow and could last you longer. 

If you’re in a company pension and haven’t made an investment choice, your money will probably be in an investment strategy chosen by your employer. This is sometimes called a lifestyle profile or an easy option. These strategies are also the ‘default’ option for some personal pensions. 

If you’re in a one of these types of option then it’s likely that your money is being spread across different types of investments and countries, as this can help smooth out the returns you get. This is because different investments tend to go down as well as up in value at different times, and are affected in a variety of ways by factors such as economics, politics and conflicts. The process of spreading your money across different types of investments is known as “diversification”. However, if you’ve selected your own investments, you might want to check where you're invested.  
 
If you have a Standard Life pension plan, you can check the value of your plan through our app or by logging in online. You can find out more about our online services on our website. Or you can visit our support page for FAQs and ways to get in touch. 

 

The information in this article should not be regarded as financial advice and is based on our understanding in April 2025. 
 
Remember that the value of pension plans and other investments can go down as well as up and you may get back less than was paid in.