What happens to my pension pot when there’s uncertainty in the financial markets?

Like all pensions, your Nest pension pot is invested in financial markets like stocks, shares and property. This helps us grow your money over the years, if not decades that you’re saving with us.

We pick markets that generally rise in price over the years, choosing the ones we think will make money for you. However, their long-term rise can occasionally be interrupted by events like the Covid-19 pandemic, rises in national interest rates, energy shortages, global conflict and political crises. These kinds of events create uncertainty. In turn, this uncertainty causes the price of financial markets to rise and fall unexpectedly, which could affect how much you have in your pension pot.

It’s worth remembering that prices don’t tend to keep falling. Once the short-term uncertainty is over, markets tend to begin rising again. These short-term falls are a natural part of investing and are built into our strategy. Our goal is to make sure that your pot grows enough to match or beat the rising cost of living, even after accounting for our charges.

We protect your savings in two ways. One is the long-term nature of our investment strategy. Investing your money over years, or even decades, means it can take advantage of long-term rises in the market. Ultimately, these rises should balance any temporary falls in price.

The other is that we spread your risk by putting your money into lots of different markets – in fact, our flagship strategy invests in more markets than the average pension provider. This is the investment equivalent of making sure we don’t put all your eggs in one basket.

Over 99% of our members are invested in one of our flagship Nest Retirement Date Funds. You can find out the specific fund you’re in by logging in to your online account. We’ve designed these funds so they shouldn’t be overly affected by short-term issues, like falls in the stock market.

If you’ve changed to the Nest Higher Risk Fund or the Nest Sharia Fund, you might see bigger falls in your pension pot. That’s because a larger proportion of your money is invested in company shares, which are more affected by uncertainty than other markets. However, your pension is likely the longest-term investment you’ll make. Short-term changes to the market may not affect what you’ll get when you retire.

To find out which investment markets your fund invests in, check out our quarterly investment reports. They’ll give you a regular breakdown into where your money is invested and how your fund is performing.

Simply log in to your Nest account to find out.

We believe our flagship Nest Retirement Date Fund works for most people and have carefully designed its investment strategy to handle any potential temporary falls in the markets.

If you’re looking for guidance for your specific circumstances, then it might be worth discussing your options for a financial adviser or exploring MoneyHelper. You’ll find more information on our Guidance and advice webpage.

If you’re seeing significant changes to the markets when you’re close to needing your pension, we understand this can be stressful. We’re here to offer help and support. As always, the best course of action is to seek independent, expert guidance for your specific circumstances. MoneyHelper may be able to point you in the right direction.

You’re likely to be saving into your pension over a long period of time. That means the younger you are, the more time you’ll have to recoup any short-term losses. If you plan on using your pension savings in the near future, you may want the reassurance of knowing your money won’t be affected by world events.

Over 99% of our members are in one of our Nest Retirement Date Funds, which begins to move your money into safer investments ten years before your Nest retirement date. This is known as lifestyling, and it keeps your pot safe from unpredictable changes to the markets. It’s one of the reasons we recommend you keep your Nest retirement date in line with your future plans. If you’ve chosen a different Nest fund, not all them are lifestyled and it may be worth checking your fund matches the level of risk you’d like to take.

The Covid-19 pandemic affected markets and investments around the world. But even when times have been 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 funds have since recovered from these low levels.

You can rest assured that our investment strategy has been carefully designed to protect your hard-earned money from events like this. Our in-house investment team continue to closely monitor what’s happening in the wider economy, making any changes to the strategy where necessary.

During the Covid-19 pandemic, we saw a rise in scams. Our Pension scams and online security page has guidance on how to keep you and your pension pot safe during this time.

When markets are quickly rising and falling in price, this is known as high volatility. It means that market prices change quickly from day to day, hour to hour, or even minute to minute.

When you transfer your pension pot, all investments in your current scheme are sold at the market rate that day. The money is then used to buy different investments in your new pension scheme. If markets move significantly during the time it takes to complete your transfer, you risk locking in any investment losses.

We recommend you get free, impartial guidance from MoneyHelper or discuss your options with an FCA regulated financial adviser before you transfer your money.