What should I do if my pension is losing money?

Are you worried that your pension is performing poorly and losing money? Perhaps you are considering moving providers or switching funds? 

It may not be too much of a concern if the poor performance is down to short term issues, such as an economic downturn or disruption due to wider worldwide political issues. 

Historically, the stock market tends to outperform savings accounts over time, so there is usually no need to make hasty decisions you might later regret.

Why is my pension losing money?

It can be worrying and frustrating when you examine the performance of your pension and see that it has lost value. 

Workplace and personal pensions are generally invested in the worldwide stock markets.

However, these can prove temperamental in times of turmoil, such as war, economic crises or other times of uncertainty.  

Indeed, investors have seen plenty of volatility in recent years with the effects of the Covid pandemic, the Ukraine war, President Trump’s tariffs and more recently the Iran war all having an impact on our investments. 

However worrying these things might be, their impact will tend to be short term.

From a historical perspective, over time, stock market gains generally outperform the interest accrued on savings accounts, so it is well worth riding out short term issues.

How are pensions invested?

Most pensions will be invested in stock market investments – company shares, gilts and bonds. 

Shares are effectively a slice of a company, while gilts or treasuries represent money loaned to governments and bonds represent cash loaned to companies. 

These can all fluctuate in value depending on the wider world economy, political landscape and the performance of the individual companies. 

Many pension savers may also find that their money has been invested in the provider’s default pension fund, which is not necessarily right for their individual needs. 

If you contact your pension provider, you should find that alternative funds will also be available to switch your pension pot into if you wish to do so.

Should I be concerned that my pension is losing money?

Unless you are due to retire very soon, how your pension is performing right now is of limited concern.

What it will be worth in 10, 20 or 30 years when you actually retire is really what counts, and a lot can happen between now and then. 

However, if you are over 55 and set to retire in a few years, you may need to take action sooner. 

Some pension providers also move retiree savings into something known as a ‘drawdown cycle’ a few years before their retirement. 

This entails moving their funds from more risky investments, such as shares or equities, into ‘safer’ investments such as bonds and can sometimes prove to be an issue for investors. 

This process is sometimes also known as ‘lifestyling’, and it is not necessarily right for everyone’s retirement portfolio. 

Traditionally, this was done as most retirement savers would have been opting to buy an annuity at retirement, but now many retirees choose to draw down an income from their pensions and keep the capital invested in the stock market. 

In addition, bonds have not always proved to be as ‘safe’ as investors might have assumed.

During the mini budget crisis in 2022 under former Prime Minister Liz Truss, the bond market crashed due to economic concerns, leaving many new retirees struggling with poorly performing pensions. 

Usually, the bond markets are negatively correlated to the equities markets – meaning bond markets perform well when the equities markets slump – but in this case, the opposite was the case. 

Due to the lack of City investor confidence in the Truss administration’s economic policies at the time, the cost of government borrowing (gilt yields) rose and the bond markets and equities markets both slumped, hitting people’s pension funds.

Use our pension calculator to find out what your pension could be worth:

How can I keep track of my pension?

Nowadays, most pension providers allow you to track your pension online for your convenience.

If you don’t already have online access to it, contact your pension provider so that they can set up an online account for you.

Is it a good idea to consolidate my pensions?

If you have several workplace defined contribution pensions, for example, in different pots with different providers, it may be a good idea to consolidate them into one. This could make it easier to keep tabs on them and track their progress. 

However, it’s sensible to get financial advice first to ensure that you won’t be charged an exit fee or lose out on certain pension benefits by doing so. 

Some new providers may cover the exit fee from your existing provider, however, up to a certain limit. 

Also, bear in mind that it is not usually advisable to transfer out of a defined benefit (final salary) pension, as you will miss out on the benefits which are unlikely to be replicated by a defined contribution scheme.

What should I do if my pension continues to lose money?

It is a good idea to check in on your pension and other investments at least once or twice a year to see how they are performing, and if their performance continues to be a concern, it may become necessary to act. 

If your pension continues to lose money over an extended period and you feel you are not getting value for money, this could be an ideal opportunity to make a change. 

It could be as simple as switching funds with your existing pension provider – adjusting how your investments are diversified between different assets and geographic areas – or moving to another provider altogether.  

It is also worth keeping an eye on the fees your pension company charges, as over time, high fees can eat into your profits. 

An experienced financial adviser will be able to help you consider your options. 

If you are aged 50 or over, you can also book a free appointment with Pension Wise, a government helpline from MoneyHelper.

Get expert pension advice

Worried that your pension is losing money? If you are not due to retire for 20 years or more, it shouldn’t really be a major concern.

Short term stock market fluctuations can affect your investments but should be even out over the long term. 

However, if you are nearer to retirement, it may be worth taking a second look at your pension investments to make sure they are still in line with your future needs. 

Unbiased can pair you with an expert financial adviser who can help you with your retirement planning and set your mind at ease.