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Should pension planners be concerned about market fluctuations?

Under normal circumstances, market fluctuations are nothing to fret about. It is common for markets, and consequently share prices, to move up and down in accordance with business developments and wider external events. 

But admittedly, the current economic environment is far from normal.

Inflation is soaring and expected to reach as high as 14% this year, and interest rates have reached a 13-year record high of 1.25%. Elsewhere, the conflict in Ukraine is contributing to skyrocketing energy bills, and all these combined are contributing to exceedingly slow UK economic growth and market volatility. 

Understandably, this will unnerve some retirement planners, as the value of their pension investments will be directly impacted by such complications.

Initial panic

Given the timing of these dramatic economic events, it is understandable that people may panic slightly. After all, the UK has just emerged from the shadow of Covid-19, which essentially forced the partial closure of the economy. And just as people were beginning to regain some financial confidence, the cost of living began to skyrocket. 

Indeed, recent research from My Pension Expert revealed that half (50%) of wealthy pension planners consider inflation to be the greatest threat to their retirement plan.

Consequently, many people may feel forced into making rash decisions to ensure their money holds its value in the long term. Indeed, almost half (58%) of wealthier investments claim that the current economic climate is driving them to consider riskier investments to make their money work harder. This is particularly worrying considering that just 32% have sought independent financial advice regarding their retirement investment strategy. 

Of course, for some, higher-risk investments could greatly benefit their retirement strategy. However, this can only be clear after a thorough audit of one’s financial situation, as well as the wider economic circumstances that influence them. Panicked decisions regarding stocks and shares without such due diligence could result in permanent losses and a great deal of long-term damage to their finances. 

The bigger picture

It is important to remember that pension investments are a long-term savings mechanism to fund one’s retirement. Therefore, whilst the short-term volatility and uncertainty might be worrying, the markets are more likely to settle over the long-term – and this should be considered when making decisions about said investments. 

With this in mind, it is vital to consult an independent financial adviser before making any changes to one’s retirement investment strategy. After all, independent financial advisers, like our team at My Pension Expert, can calculate a client’s risk appetite in accordance with their existing financial situation and their future goals and make the appropriate recommendations to maximise their savings and achieve the best retirement outcome to suit their needs. So, clients can be confident that their money is working as hard as possible, despite such volatility. 

Market fluctuations can be unnerving even for the most experienced investor, particularly within the UK’s current economic context. However, there is no need to panic and make immediate changes to one’s pension plan. Instead, Britons should remain calm, consider the bigger picture, and seek independent financial advice. In doing so, pension planners will ensure that they remain on track to their desired retirement outcome.