Value of pension is freaking me out

Twentytwothousand

Obviously pensions took a hammering at the beginning of Covid but my main pension pot feels like it's taken a massive hammering between December and January (lost 6%).  Pre Covid there were swings and roundabouts but the trajectory was generally upward (and I'm paying in over £1k a month so that alone should ensure that).   Is this a general pension thing or should I look at moving?

R_P_W

Why are you looking at performance over a couple of months??

I'd say any hammering over COVID has probably recovered now (I know mine did some time ago).

Don't know what you mean by 'general pension thing'?  Investments go up and down!

kinger101

A 6 percent dip in one month isn't all that unusual.  You should be invested according to your age from retirement, and attitude and capacity for risk.  I'd say more than 10 years out from retirement 80-100% equities is fine.  A global index tracker is down about 3% MOM, so it looks like you might have a slight bias toward riskier funds.

What are you invested in?

gm0

Don't worry.  But be prepared for 60% at some point.  A couple of times over 20 years more than likely.

Personal ancecdote from the times when an annual posted statement was "state of the art" for pension comms.  Statement showed up - oh - it's more or less halved in value last year.  That drew my attention and it did not feel good. 
Monkey brain - recency bias, loss aversion.  Does this mean my retirement is impoverished by half ? (Spoiler - no it probably doesn't and no it did not).

The underlying reality - keep saving through the volatility.  If it falls by 50% units are half price - huzzah.  And 5+ years later - it's all back up (every time so far ever but no promises) and you bought way more units which have doubled in value during the bottom half of the sine wave around the long term trend.  Take a good long look at the market shape over 20-40 years. 

Short term volatility is GOOD during saving/accumulation. It's in deaccumulation/drawdown where the sequence of returns driven by volatility is unloved as you are now "selling" through the dips and more of your pile of stocks is eroded by the income you take and if this happens long enough in early years of retirement then this is where problems can arise.  This is why personal DC drawdown carries risk and why you need to plan or hire an adviser to set you up safely for whatever your family context demands by way of safety - by starting to think about it in your mid 50s. 

Before that you can just keep saving checking that your scheme investment choices are a) sensibly priced so you get the compounded return on excess costs avoided b) aggressive enough for someone your age and with your time horizon and attitude.  That may be the default fund in your scheme if that's what you use and it may not be. 

Some people confuse day or short term trading with long term pension investing.  And a very tiny minority of them get a sequence of speculative concentrated investment bets correct (by luck or judgement or some of both) and then confuse said luck with genius level skill.  Evidence footnote:  Declared CFD/day trading % of customers who lose, SPIVA report on % funds which "beat" the market over more than a year or two i.e. consistently over a longer pension saving timescale).  Google it if you don't believe me.  And then consider are *you* equipped to be one of that tiny % and going to spend the time on it or is it just a lottery

In reality most people in the street tracking short term movements and fiddling with a 40 year pension investment are just going indulge in a form of financial self harm. 

Don't look at it too often as it just triggers a fight/flight desire for what is very likely to be the exactly innappropriate response - to sell or to stop saving in a dip.  Go and watch some Kroijer or PensionCraft introductory videos or read some Monevator articles and hopefully you will start to feel better about it.

cfw1994

The great news for you is that you are still investing: any dips as we have now are a superb buying opportunity!

As above - what are you invested in?   
Pensions are not all the same!   Some may be very low risk, but over the long term investment period of a pension, they will probably not grow as well as higher risk investments.   But looking month to month in the accumulation phase is never going to tell you much: how long have you been investing?

Always worth looking over the longer term to realise how markets can move up and down.

The bigger risk, IMHO, is to those early on in drawdown (ie, taking money OUT of their pension funds).  That is known as the 'sequencing risk', or 'sequencing of returns risk'.  See this description for a simple example.



  

NedS

Twentytwothousand said:

Obviously pensions took a hammering at the beginning of Covid but my main pension pot feels like it's taken a massive hammering between December and January (lost 6%).  Pre Covid there were swings and roundabouts but the trajectory was generally upward (and I'm paying in over £1k a month so that alone should ensure that).   Is this a general pension thing or should I look at moving?

cfw1994 said:

The great news for you is that you are still investing: any dips as we have now are a superb buying opportunity!

  

I agree - you should be delighted, equity is on sale and you are getting it 6% cheaper than you were a couple months ago and your £1000 is buying you 6% more. The price of everything else you purchase is going up, yet one of your biggest monthly purchases (outgoings) just got 6% cheaper (and is likely to get even cheaper still) - What's not to like?

Grumpy_chap

Twentytwothousand said:

Obviously pensions took a hammering at the beginning of Covid but my main pension pot feels like it's taken a massive hammering between December and January (lost 6%).  Pre Covid there were swings and roundabouts but the trajectory was generally upward (and I'm paying in over £1k a month so that alone should ensure that).   Is this a general pension thing or should I look at moving?

I think many funds experienced a loss in value in the first half of January. 

FWIW, I was checking my fund because I made a lump sum contribution in November and wanted to check it had deposited correctly to the account - it had, but the fund also dropped in short timescale a few days back to just negate the full value of the lump sum contribution.  Clearly, the timing of the contribution was not great, but it will just ride through and, actually, the pension fund would have dropped with or without that lump sum.  Long term investment, best to only look once per year at most.

eskbanker

Twentytwothousand said:

Value of pension is freaking me out

[...]

my main pension pot feels like it's taken a massive hammering between December and January (lost 6%)

If you're 'freaked out' by a 6% drop and consider this a 'massive hammering' then you've invested some way beyond your risk tolerance, so either get out of whatever you're in for something more conservative or educate yourself about risk and realistic expectations....

Audaxer

Twentytwothousand said:

Obviously pensions took a hammering at the beginning of Covid but my main pension pot feels like it's taken a massive hammering between December and January (lost 6%).  Pre Covid there were swings and roundabouts but the trajectory was generally upward (and I'm paying in over £1k a month so that alone should ensure that).   Is this a general pension thing or should I look at moving?

What percentage of equities is in your pension? If you have 100% equities or near that amount you are probably above your risk tolerance if you are concerned about a fall of 6%. 

dunstonh

Obviously pensions took a hammering at the beginning of Covid but my main pension pot feels like it's taken a massive hammering between December and January (lost 6%).

100% equity portfolios were down around 35% (variances will exist with different risk profiles) with Covid.  It was the third largest drop in 25 years.  However, by around July/August they were back up again to where they were before CV.

The last few months have seen most markets stable or up but tech, in particular, has dropped a lot. Still less then CV.

A 6% fall is not a hammering.  It doesn't qualify as being classed as a correction let alone a crash.

Is this a general pension thing or should I look at moving?

Absolutely nothing to do with pensions.  Pensions are just a tax wrapper for your investments.  Pensions do not go up or down.

I suspect that if you have a 6% drop, you are heavier in tech stocks in your portfolio.  And if a tiny 6% drop is freaking you out, then you are invested above your risk profile and need to either do some learning to improve your understanding or reduce your risk profile (or both).

God help you when you see a period like 2000-2002 where there was three negative years in a row and markets fell around 43%.

If you can tell us how you are invested (what funds) you are in, we will be able to explain what has gone down and look at how risky you are.    I  don't know if you are using an adviser or DIY.  However, new DIY investors do have a habit of going into very high risk/volatile investments and tend to favour US markets in particular.   

Albermarle

For reference a typical medium risk portfolio ( as held by the majority of pension fundholders via the default fund ) has performed as follows
Over 5 years - + 7 to 8 % pa 
Over the last 12 months approx+ 7%
Over the last 3 months + 1.5% 
Over the last month - minus 3 % 

It is a blip , unless it continues for some more months in this direction.