My pension is losing money. What should I do?

If your pension is losing money, understanding how pension investments work can help ease your fears.

Why is my pension losing money?

Watching your pension drop in value can give you that uncomfortable feeling in the pit of your stomach and leave you wondering what’s going on. And because we can now use online apps to ‘watch’ our pensions, it’s natural to feel anxious if you’re seeing the value go down. 

We’ve lived through a host of events in the last few years that have made things more challenging for pension savers. The COVID pandemic, war in Ukraine, higher energy prices, inflation, and rising interest rates, have created instability in the markets and reduced the value of investments and pension funds. And this may have had a knock-on effect on the value of your pension.

If you’re feeling concerned then don’t worry because understanding how pension investments work, can help to ease your fears.

What causes pension funds to drop in value?

When global financial markets experience a dip, it affects all types of investments everywhere including pensions. Political and economic uncertainty, disease as well as conflict, affect financial markets and cause them to rise or fall. But markets do recover after a fall and because your pension is a long-term investment, any dips are likely to be short-lived. It’s been proven that over time, pensions consistently provide gains for savers. 

How do pension investments work?

Your pension fund is made up of lots of different investments that can range from company shares, to government bonds, and property. 

When you’re investing in a pension plan, what you’re actually doing is buying units or a stake in the pension fund. So for example, if you own 100 units and the value of each unit is £1, then your pension pot is worth £100. 

The price of these units changes every day, moving up and down, depending on the performance of the investments in your pension fund.

Over time, the value of each unit will hopefully increase as the investments in your pension fund increase in value. If they do, the value of your pension will increase. And if you’re paying into your pension each month, you’re buying more units and increasing your stake and hopefully growing your pension over time.

What should I do if my pension has lost money?

It’s worrying to see the value of your pension falling but it’s important to remember that unless you remove your savings from your pension now, they’re only losses on paper at this point. What matters most is the value of your pension over time - 10, 20, or even 30 years from now.

Fluctuations on a daily basis are normal with any type of investment including pensions. The best course of action is often to leave your pension to recover. A rash decision to try and move your money because of a short-term dip in value, means the losses become real. 

How to keep track of your pensions

If you want to check on the performance of your pension and monitor it over time, then most pension providers let you log in online. Your employer or pension provider will be able to help you access your pension online.

Keeping track of old pensions is one of those tasks we put off, often because we don’t know where to start.

It’s really common for workplace pensions (a way of saving for your retirement that's arranged by your employer) to be with different pension providers for each job you’ve had and so, you could end up with several pension pots. You’ll remember paying into a pension, but may struggle to recall who the pension was with and have little idea how it’s performing. 

Factor in things like house moves and pension providers going paperless so you no longer receive paper statements, and it feels like an impossible task!

Thankfully, there’s some easy steps you can follow to track down lost and forgotten pensions. Once you’ve found them, you can start to think about managing them going forward.

Speak with past employers

First, contacting previous employers is often the best way of tracking your pensions. Your ex-colleagues in the HR department will be able to signpost you to the pension provider so you can get in touch with them directly. Having the rough dates of your employment and your National Insurance number to hand will help your previous employer help you.

Use a Pensions Tracing Service

If you’re unable to contact your employer – they may have stopped trading or be trading under a new name - you can use the government’s Pension Tracing Service

It’s free to use and if you know the name of the employer it will list their pension providers and you can then contact them directly.

You can also use our Find & Combine service to look for a UK workplace or personal pension. Providing you know the pension provider, we can help you trace a pension and review the benefits and fees.

Rediscovering your old pensions is not only pleasing, it means you can manage them better from now on. 

Transferring your pension

Once you have your pensions in sight then it’s worth exploring transferring your old pensions into a single pension plan. You might save on admin fees and find it easier to manage your pension. 

You’ll need to consider charges or exit fees, funds and any valuable benefits that could be lost. You may also be required to obtain advice before transferring your pension, for which a fee will be charged.

It’s always worth remembering, that the value of an investment can go down as well as up and you could get back less than you invested.

While it can be un-settling to witness a decline in the value of your pension, it's crucial to remember that these fluctuations are a normal part of investing. The recent global events and economic uncertainties have undoubtedly impacted pension funds, but history has shown that markets tend to recover over time. Ultimately, the value of your pension over the long term, not its day-to-day fluctuations, is what matters most.

Plan your future with an Aviva Pension

You can start an Aviva self-invested personal pension from just £25 a month and we have a range of investment options to help reach your goals. Capital at risk.