What happens if my workplace pension pot loses value without going bust?

pieroabcd

Hi,
I've always read that workplace pensions are protected by the Facts, but I've always had a doubt: what happens if they lose money (say for example 80% if value considering all contributions made by me, that would end up being much more considering the appreciation over time) without actually going out if business?

Would I still be able to get my money back? If do, how much?

Thanks 

MeteredOut

The pension provider and where your money is invested are two separate things.

The investment choices you make with your pension funds are not protected. So, if you invest in a particular fund and it goes down 80%, you've "lost" that money (if you sell at that price).

You are protected if your pension provider goes bust; you still hold those investments.

pieroabcd

Choice... Assuming the case that I didn't do any choice and left the investment strategy as they chose at the beginning?

MeteredOut

pieroabcd said:

Choice... Assuming the case that I didn't do any choice and left the investment strategy as they chose at the beginning?

You might not have realised it, but you probably did have a choice. Many people just invest in their employer pension scheme's default fund though. In the end, where the money is invested is your responsibility.

pieroabcd

MeteredOut said:

The pension provider and where your money is invested are two separate things.

The investment choices you make with your pension funds are not protected. So, if you invest in a particular fund and it goes down 80%, you've "lost" that money (if you sell at that price).

You are protected if your pension provider goes bust; you still hold those investments.

So the loss is such only at selling?
In that case it could be sufficient to wait, if you have time.

bjorn_toby_wilde

pieroabcd said:

Choice... Assuming the case that I didn't do any choice and left the investment strategy as they chose at the beginning?

As MeteredOut says, they still could lose value and by choosing to leave them in the default funds you have made a choice.

Brie

Unless you are in a defined benefits scheme as I understand it there is little protection of your pension. 

If yours is a defined contribution scheme  and if the funds are invested in shares that bottom out then the pension you can receive is significantly impacted.  This is why people will ask questions about their pension fund value decreasing over certain periods of time.   So the stock market might have been sailing high during 2021 and then in Jan 2022 Putin invaded Ukraine and the markets plummeted.  Because the markets went down the value of pension funds went down.  It is for this reason that pension fund managers tend to have a variety of funds they invest in to lessen this sort of impact.  It's also why as you approach retirement age most funds are organised to move your money into safer, less volatile shares so you can better plan what money you will have available.   

If you are lucky enough to be in a DB scheme your money if very safe even if the company goes out of business as they are required to have guarantees in place about how the money is kept.  Should they go out of business there is a programme whereby the expected pensions will still predominantly be paid out - but they may be 90% of the predicted value or similar.

MeteredOut

pieroabcd said:

MeteredOut said:

The pension provider and where your money is invested are two separate things.

The investment choices you make with your pension funds are not protected. So, if you invest in a particular fund and it goes down 80%, you've "lost" that money (if you sell at that price).

You are protected if your pension provider goes bust; you still hold those investments.

So the loss is such only at selling?
In that case it could be sufficient to wait, if you have time.

I'm getting a feeling there is something behind this line of questioning. Is there a particular issue with your workplace pension fund that you might have a query with?

If you are invested in a fund that is 80% down, you should be asking yourself whether that is still the right investment for you.

pieroabcd

MeteredOut said:

pieroabcd said:

MeteredOut said:

The pension provider and where your money is invested are two separate things.

The investment choices you make with your pension funds are not protected. So, if you invest in a particular fund and it goes down 80%, you've "lost" that money (if you sell at that price).

You are protected if your pension provider goes bust; you still hold those investments.

So the loss is such only at selling?
In that case it could be sufficient to wait, if you have time.

I'm getting a feeling there is something behind this line of questioning. Is there a particular issue with your workplace pension fund that you might have a query with?

If you are invested in a fund that is 80% down, you should be asking yourself whether that is still the right investment for you.

No, it's going well, but since I tend to have a negative attitude I always wonder "what if" and try to prepare to the worst possible scenario.

bjorn_toby_wilde

pieroabcd said:

MeteredOut said:

The pension provider and where your money is invested are two separate things.

The investment choices you make with your pension funds are not protected. So, if you invest in a particular fund and it goes down 80%, you've "lost" that money (if you sell at that price).

You are protected if your pension provider goes bust; you still hold those investments.

So the loss is such only at selling?
In that case it could be sufficient to wait, if you have time.

Exactly. Which is why as you get closer to retirement it’s considered wise to move some of your pension into less volatile investments so that you have a few years of reliable income, giving the other investments time to recover in the event of a market drop.

MX5huggy

You really need to tell us what company and what fund your pension is in because the protections for a 1980’s closed DB pension and a modern DC with everything in between are entirely different.