Pensions - I know it's been done to death

[Allthenameshavegone1972]

I know it's been done to death, but I suppose I just need to vent. Both dh & I have been paying into one, like the good citizens we are. Now all of this recent trouble, like for everyone else, has caused them to nosedive. He was planning to stop work at 65, now he'll probably stay until he's 67. He's 61 this year. No one knows what will happen, but I just hope those 6 years is enough time to recover. If it does recover it'll only be enough to put us where we were in pension terms instead of moving forward.
Me, I am just about to give up my job for a career break & hoping to just go back to temping in a few months time. There's usually accounts temp work going. It's too late to withdraw my resignation as I've already started handover. I don't want to stay at my job anyway. I'm burnt out mentally & had a lot of depression this year. Felt it was starting to lift & I can feel that black cloud descending again.
Save for the future they tell us little people, then they snatch it from us in one day. We may as well have blown the money on enjoying ourselves!

Look at all of the past stock market "crashes" through history, and they fade into nothing over a few years. Ignore the day to day movements, even the really big ones, and keep doing what you can to improve your situation, spending and saving responsibly. It will work itself out

If there’s a crash it just means that you can buy more units at a lower price and then ride it out until it recovers. The overall trend is still upwards long term.

Your pensions should have some sort of strategy to de-risk your investments as you reach retirement age (like the 10-15 years beforehand). Make sure you’ve told your provider when you intend to retire so they can make sure you’re in the right funds in the lead up. Ask them what the strategy is. It should be in your annual statements.

Nobody has snatched anything from you. You still have the exact same number of units in your pension fund as you did last week, but the value of each unit is currently less than it was last week.

For example, if you buy 1 unit today, it might cost you 50p, whereas if you'd have bought that unit last week, it might have cost you 75p. So if you've got £10 to put into your pension, this week you'll buy 20 units because they only cost 50p each. But if you'd put that £10 in your pension last week, you'd only have bought 13 units, because each unit cost 75p. So if you keep on buying (i.e. paying into your pension) then you'll be buying many more units than you were able to buy previously, because previously the units cost more.

Eventually, the value of all those cheap units you bought will rise again, and your pension will increase because you still have all those units, which no one snatched from you.

But the OP's husband is 61 so what happens in the short term is more important than the long term.

It’s been a dire few days but I personally would not change my plans in your shoes . You have a few good years to wait for a recovery , which it will .

Your husband is going to have to work for 2 more years because of 2/3 days of the markets dropping? I would assume that the pensions would not be that volatile. Maybe speak to an IFA to put your mind at rest?

Eventually, the value of all the cheap units you bought will rise, and your pension will increase because you still have all those units, which no one snatched from you.

Well obviously that's what we all hope but at the moment there is no clear indication of how long that may take. I can fully understand the OP's worries.

You presumably won't withdraw from your pension all at once, so you have decades (which won't be needed) for the markets to correct whilst still retiring at the intended age.

PP are correct. Make sure you inform your pension provider of your retirement age. Also, now is the time to pay more in if possible as you will benefit from that hugely when things go back up.

Hold your nerve and don't panic. Remember what happened to the markets with covid? They corrected just as it does every time.

People stressing and making huge changes are the ones who lose out.

You’re missing the point, “eventually” their pensions increasing is irrelevant to the OP due to timing.

@FeministUnderTheCatriarchy how does she have 'decades' when she and her husband are in their 60s?

Because they can keep their pensions invested for the rest of their lives - which will hopefully be decades if they live long enough - and can drawdown from them.

I’m not sure what your plan is but there isn’t one date whereby a pension is valued unless you’re buying an annuity.
These days most people drip feed their pension into living expenses over time in which case there is still time to bounce back.
The main thing with the stock market is to see the highs as the aberration. This period though is the insane though and unprecedented because it’s the actions of one man.

No, I've not missed the point. OP's husband is 60 and is not planning on retiring until 65. So he's got several years yet until he's going to use his pension. This week, the markets are panicking - just like they did in Covid.

Given he’s so close to retirement, are his investments not on a pathway to a lower risk strategy?

Also, unless you’re planning to buy an annuity (the prices of which move with markets also and are not static), then DP will not be looking to access all of their pot on day one, so there’s still plenty of time for the investments to recover.

Similar sort of age and not panicking….yet. Pp is correct in that these days there is a choice not to commit their retirement fund into an annuity, therefore the money can stay invested and therefore will have time to recover. Unprecedented times though; previous crashes through events in which the world could work together to try to correct; this time the most powerful man in the world deliberately destroying economies, including his own. Who the hell can predict where this will go.

Unless they’re planning to buy an annuity, they shouldn’t be fully derisking (because then you run into the other risk- running out of money). But they should have been thinking about what they plan to do at retirement and checking whether their holdings are suitable for that.

4 years could well be fine, op. I don’t think this is going to be a v shaped dip but I do think things will recover within a reasonable timeframe. Would suggest you make an appointment with Pension Wise (it’s free). Don’t do anything hasty.

This!

Why would your pension be in equities to any significant degree with such a short time to intended retirement?

This, this is exactly what is worrying a lot of us at the moment. For those of us close to retirement, our carefully planned retirement funds are losing value which puts our retirement funding in jeopardy as there isn’t time for a long-term recovery.

I would relax. 4 years to retirement is a long time in markets. And as PP have said, if you gradually drawdown your effective time horizon is much longer anyway, probably (hopefully!) more than fifteen years.

Markets have fallen. It happens. They’ll go up again eventually.

Honestly for a pension, as long as you’re confident it’s invested sensibly, the best strategy is not to look too often. Changing your retirement age with for years to go in response to three days of market volatility is silly.

Share prices have fallen to where they were 12 months ago. As it stands, it’s not the end of the world. I lost about 20% of my pension pot in 2019, and even with Covid and the Truss debacle it bounced back eventually.

Please don’t panic. Historically it has taken about two years for the stock market to rebound - you have plenty of time.

In fact as a PP has said, markets have been riding at all time highs recently and this is a bit of a ‘correction’ back to where they were last summer - did you feel poor then? The growth couldn’t keep going at those rates.

We’re probably in a worse situation than you as we’re retired and drawing down from our pension fund.

The best advice we had was to split our risk so we also have pensions (state and private), a paid for house and cash isas. We were told to have at least two years income in cash so that if/ when the stock market crashed, we wouldn’t need to draw money from it at its lowest. So now we just sit tight, use that money if we need it and wait for the market to recover.

You dont need to respond to below questions on this forum, but if you do, that may help you to get some feedback - Irrespective, do check these and do some reading online.

How are your pension invested, which strategy is being used like 50% equity, 50% fixed income ?
What is your target retirement age in pension plan?
How much drop have you noticed, should be 10-20% since beginning of year? Any more drop means you may have to review your investments and risk profile.
Do you understand how you are going to take out your pension?

Thank you for all your advice. Looks like we have to wait it out & hope. Dh has said if he has to work until he's 67 then he will. He's already had a chat with his company's pension advisor some time ago and has his pension in a lower risk investment now that he's getting older.