How to weather stock market volatility and protect your pension

Ffion White

by , PR Manager

02 May 2024 /  

May 2024

Headshot of PensionBee Director (VP) of Public Affairs, Becky O'Connor.

Turbulent global economies and stock markets can leave consumers feeling anxious about their financial security, particularly when it comes to their pension savings.

Becky O’Connor, Director of Public Affairs at PensionBee, sheds light on the factors causing current market volatility and offers some practical tips to help people safeguard their pensions:

Understanding market swings and global factors

Recent news of sticky inflation, decade-high interest rates, and geopolitical tensions create a challenging economic climate. Despite signs of decreasing inflation in the UK and Europe, economic activity remains depressed with the unemployment rate rising.

Persistently high mortgage rates and rising household prices have stifled new economic activity in the UK and Europe, making it harder for consumers to purchase new items and impeding businesses’ ability to invest in growth.

Higher than expected inflation in the US has led the Federal Reserve to delay expected interest rate cuts, meaning that borrowing will continue to be challenging and interest payments will remain high for governments, businesses and consumers. This, coupled with the upcoming US presidential election, adds uncertainty to the US economy.

Meanwhile, escalating geopolitical tensions in the Middle East have also contributed to market volatility, as the Middle East is responsible for producing a significant proportion of the world’s crude oil, affecting the stability of the global oil market and fear around inflation.”

The Impact on Pensions

Most pensions are invested in the stock market and typically include some of the top-performing US companies in their main holdings. These are often referred to as the ‘Magnificent Seven’, (comprising Apple, Microsoft, Amazon, Alphabet, Nvidia, Meta and Tesla). Together, the ‘Magnificent Seven’ make up more than 29% of the S&P 500’s total valuation.1

While these companies have been very successful in the past year, investor sentiment has shifted in recent weeks as it appears new Artificial Intelligence technology may not revolutionise industries as fast or efficiently as originally speculated. As such, the value of their share prices has gradually dropped in the past month and in turn, has impacted the value of some pensions.

However, it’s important to note that most pensions are diversified across a range of locations and asset types. As a result, a decline in one type of asset or location can be offset by growth in others, to achieve not only balance but ultimately growth over the long term.”

Top tips for managing stock market volatility when it comes to your pension:

Remember investments go up as well as going down: While no one likes to see the value of their retirement savings fall, if you’re many years off from retirement, it’s worth remembering that it’s normal for pensions to go up and down in value. Historically, pensions have always recovered to go on and grow - just like the stock market itself.

Consider increasing your contributions: As strange as it may sound, you may want to consider contributing more to your pension when markets are low. Your contribution will usually buy more units than when the markets are up and unit prices are more expensive, making it a cost-effective strategy.

Specifically for people approaching retirement age:

Consider reducing your risk: It’s impossible to completely isolate your retirement savings from the wider economy - even investing in cash means you could lose real value due to inflation - but being invested in a pension plan that’s designed for those approaching retirement could help reduce its risk of losing value.

Don’t make hasty decisions: When markets are down, it may be tempting to withdraw your investments under the assumption your money is safer in your pocket than in stock markets. However, the more you withdraw, the less you’ll have invested to recover when markets rise in value. Withdrawing during a downturn guarantees a loss, whereas waiting for markets to bounce ack allows you to regain and grow your investments again.”


  1. These seven tech stocks are driving the market’, The New York Times (2024)

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