Pension dropping suddenly

happymum37

Thank you all.

I'm going to get a pen and piece of paper and answer some of the questions

No we don't have a IFA

He's never taken much stock of his pension until this year when we paid off the mortgage and now has started paying in 11% of his earnings ( he's on 40k) and his box puts in 4% .

I really don't think it was invested before as he's been paying in since age 21 and this is all he has to show for it. 

He wants to leave work at 60 (12 years)  and get a fun job in the garden center. 

His family have terrible history of heart issues so I'm happy for him to do this but we are trying to save as much as poss in his & my pension. 

Have at least 13 years left to work.  Although I can go at 55 my pension is accurual-y reduced by 25% till 60

Dazed_and_C0nfused

happymum37 said:

Thank you all.

I'm going to get a pen and piece of paper and answer some of the questions

No we don't have a IFA

He's never taken much stock of his pension until this year when we paid off the mortgage and now has started paying in 11% of his earnings ( he's on 40k) and his box puts in 4% .

I really don't think it was invested before as he's been paying in since age 21 and this is all he has to show for it. 

He wants to leave work at 60 (12 years)  and get a fun job in the garden center. 

His family have terrible history of heart issues so I'm happy for him to do this but we are trying to save as much as poss in his & my pension. 

Have at least 13 years left to work.  Although I can go at 55 my pension is accurual-y reduced by 25% till 60

That is unlikely.

If you took it at 55 it's much more likely to be actuarially reduced by 25% for the rest of your life.  But you would have 5 years worth of the reduced pension (plus any annual inflation increases).

eskbanker

happymum37 said:

He's never taken much stock of his pension until this year when we paid off the mortgage and now has started paying in 11% of his earnings ( he's on 40k) and his box puts in 4% .

I really don't think it was invested before as he's been paying in since age 21 and this is all he has to show for it.

If he started a pension at 21 and it wasn't invested, that would be an extraordinary thing to have done at the time!  To a certain extent it doesn't really matter what happened in the past, unless there's any prospect of a negligence claim against an adviser, but if this is a bog standard workplace pension plan, there'll be a default investment option that will have been in place throughout, even if he has only recently decided to take a more active role in managing it.

It's not a promising sign that he feels the urge to overreact to such a minor value drop, but hopefully he can educate himself about how investing works and understand that fluctuation is inevitable when holding equities, so short term pain should be expected periodically but ignored in the context of long term gain....

noclaf

eskbanker said:

It's not a promising sign that he feels the urge to overreact to such a minor value drop, but hopefully he can educate himself about how investing works and understand that fluctuation is inevitable when holding equities, so short term pain should be expected periodically but ignored in the context of long term gain....

IMO this aspect is just as important as the choices of investment. It has taken me a couple of years to learn and build the tolerance not to make reactive changes i.e: sell during a drop and also avoid too much chopping and changing of funds (the trading fees add up and it can be a significant hit over time).
FWIW my SIPP and work pension are 100% Equities and am early 40's, not too concerned with volatility as longer timeframe before I can access and when the markets drop and if fortunate with timing will hopefully benefit from being able to buy more units of funds each month.

AlanP_2

This is also an ideal time to consider whether your overall pension savings and arrangements are going to provide you with the income you want / need in retirement and when you might aim to retire.

Increasing contributions possibly to build a larger pot.


Have a skim read of the numbers thread at the top and then try and calculate yours.

LHW99

noclaf said:

eskbanker said:

It's not a promising sign that he feels the urge to overreact to such a minor value drop, but hopefully he can educate himself about how investing works and understand that fluctuation is inevitable when holding equities, so short term pain should be expected periodically but ignored in the context of long term gain....

IMO this aspect is just as important as the choices of investment. It has taken me a couple of years to learn and build the tolerance not to make reactive changes i.e: sell during a drop and also avoid too much chopping and changing of funds (the trading fees add up and it can be a significant hit over time).
FWIW my SIPP and work pension are 100% Equities and am early 40's, not too concerned with volatility as longer timeframe before I can access and when the markets drop and if fortunate with timing will hopefully benefit from being able to buy more units of funds each month.

In fact the ideal thing for him (if not the rest of us) would be a 50% drop in 2025, followed by a slow recovery for 10 years, and a boom in the following two years.

He could buy lots of "nice cheap units" with his ongoing contributions, which will then at the end soar in value.

Won't happen, but one can always dream

dunstonh

I really don't think it was invested before as he's been paying in since age 21 and this is all he has to show for it. 

Given his age now and when he started, that puts him back in the period when insurance agents were still operating.  For all their faults, one thing they excelled at was getting people to start planning early.

The pension would have been invested the minute he started.   The pension is a tax wrapper that contains investments.

The problem with many early starters is that they started with a good contribution level but failed to increase it each year with inflation.  So, they squander that early start.   e.g. £30pm in 1990 was a good contribution but in 2024 that is an abysmally low contribution. 

Picking four high risk investment funds is likely to be poor quality investing.   It also means they will rollercoaster over the years.  Negative periods are great if you are paying in monthly.   You get to buy investments cheaper. and when they go back up again, it will be those cheaper units that make the most money.

Cus

LHW99 said:

noclaf said:

eskbanker said:

It's not a promising sign that he feels the urge to overreact to such a minor value drop, but hopefully he can educate himself about how investing works and understand that fluctuation is inevitable when holding equities, so short term pain should be expected periodically but ignored in the context of long term gain....

IMO this aspect is just as important as the choices of investment. It has taken me a couple of years to learn and build the tolerance not to make reactive changes i.e: sell during a drop and also avoid too much chopping and changing of funds (the trading fees add up and it can be a significant hit over time).
FWIW my SIPP and work pension are 100% Equities and am early 40's, not too concerned with volatility as longer timeframe before I can access and when the markets drop and if fortunate with timing will hopefully benefit from being able to buy more units of funds each month.

In fact the ideal thing for him (if not the rest of us) would be a 50% drop in 2025, followed by a slow recovery for 10 years, and a boom in the following two years.

He could buy lots of "nice cheap units" with his ongoing contributions, which will then at the end soar in value.

Won't happen, but one can always dream

He could just dream that it booms for the next 12 years

Bostonerimus1

Your sudden drop is inherent in the investments contained within your pension. Such movements are to be expected. Consider if you would be as engaged by a sudden increase of similar size...You should understand why these variations occur and that the long term performance of your pension is what really matters, not short term volatility.

IamWood

My pension pot dropped by more than £20K over the past couple of days last week. Should I be concerned? Not really—I'm in it for the long haul. The value only matters when I begin to access it.

On a side note, I took the chance to contribute further £5K to my wife's ISA, if that makes a difference.