If you check your pension regularly, you might notice the value goes up and down. You may also be unsure on the actions to take when the value dips, especially if you’re not a pension pro. So, let’s break down exactly what’s affecting your pension value and how you can make it more resilient to fluctuations.


Why does your pension fluctuate? 📈

The first and most important thing to know is that it’s completely normal for your pension value to go up and down. That’s because when you contribute money to your pension, you’re actually investing in the stock market.

It’s probable that you’ll hold and pay into your pension for decades. This means you’ll be investing in the stock market over the long term – which has historically resulted in strong returns.

But, past performance isn’t always a reliable guide to future gains, and you may get back less than you invest.


What is the stock market and how does it work?

The ‘stock market’ is where shares in publicly listed companies, such as Google, Tesla and Apple, are bought and sold. The stock market isn’t a physical place, but a global network of investors who interact with each other to buy and sell stock. 💻

The stock market works by letting people interact directly with publicly-listed companies. Your pension is likely made up of lots of individual investments across shares in a range of different companies and funds.

If companies are doing well, more people may buy the company’s stock – pushing the share price up as demand increases and supply falls. Conversely, if a company is performing badly, shareholders might choose to sell their shares, causing the share price to drop. 📉


What causes the stock market to fluctuate?

Stock markets fluctuate when investor confidence rises and falls. If investors are confident companies can generate a return on investment, they might buy more shares – which can push share prices higher. But, if investor confidence in a potential return is low, they might start selling their shares – which could in turn drive prices down.

There are lots of factors that affect investor confidence and, in turn, stock market performance, including supply of and demand for companies’ products and shares and certain economic factors such as interest rates and inflation.

🎓 Learn more about why the stock market fluctuates with the Investing Academy


So, how does this all affect your pension?

Since your pension is invested in the stock market, when there’s increased market volatility and share prices fall, the value of your pension is consequently likely to dip too. While it may be worrying to see those digits decrease, it’s important to remember that this is a normal part of investing.

Although falls in the market feel bad at the time, keep in mind that your pension is a long-term investment and is intended to weather temporary dips.

Market crashes (when the stock market falls more than 20%) have happened throughout history. And while past performance is not a reliable guide to future returns, so far every market crash in history has been followed by an eventual recovery. The chart below shows some of the most significant market declines between 1984 and 2021, along with the recovery.

While past performance isn’t a reliable indicator of future performance, 100% of market declines have been followed by a strong recovery. Rising and falling stock markets are a normal part of the business cycle and a healthy economy.




What should you do when your pension is in downturn?

It’s natural to feel that you need to take immediate action when you see your pension value fall, but often it may be better to do nothing. Withdrawing or switching your pension when it’s in a period of downturn may seem tempting but actually means you’re guaranteed a loss in money. While we can’t predict how markets will recover from future downturns, holding your investment funds means you won’t miss the opportunity to benefit from potential future growth.

🎓 Read more on how to view your pension in a period of downturn.


How can you weatherproof your pension? ☂️

As with all investing, there’s inherent risk involved with contributing to a pension – the value of your investment can go up and down, and you may get back less than you invest. However, there are things you can do to make your pension more resilient to market fluctuations…

Think carefully about where it’s invested 🤔

Your pension value is determined by how your pension is invested. Investing in one of our four pension Starting funds ensures your money is spread across a range of assets around the world, in line with your risk appetite. This is known as ‘diversification’, and it spreads your investment risk across different assets – so if one falls in value, it hopefully won’t affect the overall value of your pension too severely.
You can also choose to customise your pension allocations to build your own portfolio. Here, you’ll get access to even more funds including technology, healthcare, emerging markets and more. Customising your pension allocations means you’re in control of your allocations, so it’s important you understand how you should be selecting funds and managing investment risk.

You can change your investment allocations at any time within the Moneybox app by going to Settings > Allocations > Personal Pension.

Find out more about the Moneybox Pension Starting funds.

Monitor your pension regularly 📝

Think about your goals and objectives and assess if your current pension investments are working to get you there. This is particularly important as your goals change over time. For example, someone closer to retirement might want to opt for pension investments with a lower level of risk, or a ‘target date’ fund where the balance of your investments shifts to a lower risk level over time – like the Blackrock LifePath fund we provide.

If you’ve customised your allocation, you might want to review your investments to make sure your risk level is still right for your personal circumstances and financial goals.

Have a long-term mindset 📅

Viewing your pension through the context of long-term investment can give you a little perspective when we experience temporary downturns. When things feel a little shaky, remember investing is all about the long game.


Explore the Moneybox Pension


As with all investing, the value of your pension can go up and down, and you may get back less than you invest. Tax treatment on your pension contributions depends on individual circumstances and is subject to change. Payments you make into your pension won’t be accessible until the minimum pension age (currently 55, increasing to 57 in 2028). If you’re not sure whether the Moneybox Pension is right for you, a suitably qualified financial adviser can help you decide. Moneybox Personal Pension T&Cs Apply.