The move has posed a threat to businesses’ profits, which has meant stock markets have been hit by several days of turbulence.
Many will be wondering what the best course of action is, and though for specific direction on their needs they would need to seek financial advice, there are certain principles that experts say should generally be adhered to.
The earliest you can take your retirement pot is 55 currently, and will rise to 57 in three years’ time.
Investing if often referred to as a long-term game, and people’s retirement pots have taken hits before – for example during Covid, when stocks also fell dramatically.
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Over a long period of time, stock markets have generally recovered from plunges such as the one we are seeing now.
“In recent memory we have seen this with the Russia/Ukraine conflict and the Covid pandemic.
Workplace pension providers will choose default investments for you automatically, and will try and put your money across a range of assets.
If you are within ten years of retirement, then your pension provider may start to move your pension into less risky investments.
“You may find that you have been invested in a lifestyling arrangement which moves you out of equities into bonds over time. In this case you may find you have been less impacted than you thought,” explains Ms Morrissey.
This may particularly impact you if you are about to take your lump sum – up to 25 per cent of your pension pot, that you are able to take tax-free.
“There is a risk if that if you make a significant withdrawal while markets are lower then you not only get a smaller lump sum but also leave less scope for your remaining pot to recover in which case it’s important to take a view on whether now is the best time to start accessing your money and whether you can afford to wait.”
“Some people will opt to delay their retirement until markets have recovered. Others will decide to take less income than they initially planned,” she said.
Already taking your pension
If you have taken your pension as an annuity – meaning you have already bought a guaranteed annual income with your pot, you will be unaffected.
If you are drawing down from your pension – taking money from your pot regularly while leaving the rest of your money invested, you may find the amount you have saved fluctuates.
“One tip that people can consider to manage periods of investment volatility is to gradually build up several months of living costs in cash if they can afford to do so. This way if markets do dip you don’t need to sell investments when the price is low and can give them time to recover,” he adds.
“Things are incredibly unpredictable from day-to-day at the moment, and it doesn’t automatically follow that if markets have fallen sharply they will inevitably recover quickly,” explains ex-pensions minister Sir Steve Webb, now a consultant at LCP.
Doctor, teacher or other ‘DB’ pension holder
Among current workers, this mainly includes those in the public sector, but some older workers in the private sector have them too.
“If you have a defined benefit pension which are the norm in the public sector and still reasonably prevalent among older workers in the private sector then your income won’t be affected by the markets as the income is guaranteed,” explains Mr Ambery.
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