The past week has seen stock markets around the world plummet after US President Donald Trump imposed import tariffs on the majority of other countries, with some nations imposing ‘retaliatory’ tariffs in response.
Falling share prices means millions of Brits have seen the value of their retirement pots fall in value.
But short-term volatility is part and parcel of long-term investing. Experts say that if you are comfortable with the risks you are taking and your retirement goal remains the same, there is usually no need to take any action. In fact, ‘panic selling’ your investments now could effectively lock in the losses you have incurred.
Markets frequently bounce back from downturns. For instance, the Fidelity Index World Fund has returned 53% since 1 January 2020, having experienced the Covid sell-off, tech slump of 2022 and recent Trump tariff sell-off.
Tom Selby, director of public policy at AJ Bell, said: “The US President’s actions over the last week haven’t exactly been calming for global stock markets, with huge falls recorded across indices from the Dow Jones to the Hang Seng and the FTSE in the UK.
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“This instability can be deeply unsettling for savers and retirees, who may log in to their pensions account and see a big fall in the value of their fund. But calm at this moment, when those in the highest offices appear to be losing theirs, is the order of the day. Investing is a long-term game and there are few life goals better suited to taking a long view than saving for retirement.”
It is primarily people with defined contribution (DC) pensions that are invested in the stock market that will see a direct hit on the value of their fund when markets fall. Members of defined benefit (DB) schemes are largely shielded from such events, provided the employer standing behind their pension promise remains in business.
Selby said: “For younger DC savers who aren’t planning to access their retirement pot for decades, the events of a few days driven by Trump shouldn’t knock off course a retirement plan [that], in all likelihood, will long outlast the 47th President.
“If you are approaching retirement, the key is to review your investments to make sure they are still aligned with how you plan to take an income from your pot. Provided this is the case and you remain comfortable with the make-up of your portfolio, there should be no need to panic or fundamentally shift approach.
“For those taking a flexible retirement income through ‘drawdown’, the same message applies – give your investments a once over to make sure you’re still absolutely comfortable with the risks you are taking now you’ve been tested with a period of volatility but, provided you are and you are able to continue taking a long-term approach, you shouldn’t need to alter course.”
