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Should I stop contributing when financial markets are uncertain?

Key points:

  • This article offers guidance on contributing to your pension when there’s short-term uncertainty in the markets.
  • The article also explains how continuing to contribute could benefit you in the longer term.

Although it can be worrying to see the markets being bumpy, it’s best to think of your pension savings in terms of decades, rather than months or even years. Most Nest members are unlikely to experience a significant impact to their final pension pot from shorter-term market falls. If you’re young enough to ride it out, you’ll have many more years to save into your pension and benefit as the markets recover. If you’re close to retirement and saving into one of our main funds, we’ll have automatically moved your money into safer, lower risk investments to protect you from this kind of risk.

Please visit What happens to my pension pot when there’s uncertainty in the financial markets? for more information on your investments.

In early 2020, fears around the Covid-19 pandemic triggered a fall in many markets and investments around the world. Even when times were turbulent, our members’ investments have held up better than the market at large. When the FTSE 100 fell 34.4% in the first few weeks of the spring 2020 Covid-19 lockdown, the 2040 fund fell by half that amount. Members who were due to retire that year only saw a 0.6% difference in their savings. That’s 60p for every £100 they’d invested.

Our main funds fell by considerably less than the main UK and international stock markets because we’ve carefully designed our long-term strategy to protect your savings from short-term falls in the financial markets. Our funds have since recovered from these low levels.

We know that events like the pandemic can dominate the news. We want to reassure you that we keep a close eye on situations like these.

Our investment strategy is prepared for short-term uncertainty, so your savings are in a strong position over longer periods of time. Continuing to contribute to your pension means you’re still investing in your future – and that you’ll be able to take full advantage of our award-winning investment approach.

You may also currently benefit from employer contributions and tax relief every time you pay into your pension pot. Stopping your contributions means you’ll no longer get these extra savings.

You might want to discuss your options with an independent financial adviser. You can also get impartial guidance from MoneyHelper - previously the Money Advice Service - by visiting their website or calling 0800 678 1648.

If you still feel that you want to pause your payments, you can find out what to do in our help centre article on stopping contributions.

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