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What do uncertain investment markets mean for my pension?

The unexpected election of Donald Trump to US President has led to reactions in various investment markets around the world – with speculation that market volatility will continue over the coming years. So what does this mean if you are investing in a pension, as millions of people in the UK are?

To make things a bit clearer for you, we’ve outlined some of our top tips.

Think long-term - don’t be swayed by short term blips or eye catching press headlines. A pension is a very-long term investment (you could have funds invested for over 30 years), so there will inevitably be short-term fluctuations. What is important is making decisions for the long-term, and unless you’re an expert fund manager this often means not making changes based on short-lived trends. And, switching regularly could mean that you incur additional fees, which might cancel out any asset growth that results.

Stock markets can be volatile – there have always been ups and downs in stock markets but what is important is how they perform over the length of time your pension monies are invested.

Focus on an asset’s underlying value – a company doesn’t become a bad-bet overnight just because of political change. Sound, well-run companies with good growth prospects will ride out short-term political distortions. A good fund manager will focus on an asset’s underlying value and invest accordingly.

Spread the risk – it’s important to make sure that your pension is invested widely to spread the week. This means you should avoid investing in a single country or industry or type of asset. So even if one territory or asset class suffers as a result of specific economic or political issues, others will be less impacted and your overall pension pot will not be impacted as much.  

Check what your pension fund offers you – most company pension schemes will have a “default” fund which invests in a range of assets and will tend to switch into more secure assets as you approach your planned retirement. You should check to see what investment options your pension scheme offers (read the material they send you) – and if you do not feel confident in making your own fund choices, then the default option may be the best one for you.

Watch out for scammers – there are some scam operators who take advantage of market uncertainty by promising you investments which offer much higher returns than you are currently experiencing. If you invest in these vehicles the chances are that you will end up in one single type of high-risk investment incurring high charges. And if they don’t perform you could lose almost everything. You can find out more about pension scams and how to avoid them here.

Check the value of your pension – many people tend to ignore the statements they get from their pension scheme setting out the value of their fund. It is important to keep track of how much is in your pension and what level of retirement income this might generate. This will help you to understand whether you need to take action whilst you are in a position to do so, for instance increasing your pension contributions.

Get advice or guidance – if you need any further steer you may wish to consider getting independent regulated financial advice. Or for more general guidance we can explain your options in more detail. Find out how you can contact us by clicking here

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