Pension saving in a recession could lead to ‘well-earned uplift’

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Pensions: Expert offers tips for contributions

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With economic pressures continuing at the tail end of 2022, many pension savers are worried about what the future may hold. Some may be contemplating halting their pension saving or taking a different approach to weather the ongoing storms.

To find out more, Express.co.uk spoke exclusively to two experts who offered their insights on the current climate. 

James Norton, head of financial planners at Vanguard, said: “When the markets get challenging, it’s essential that investors stay focused on their long-term goals and not get distracted by short-term swings.

“Remember that market fluctuations are a natural part of investing and successfully timing the stock market is near impossible, partly because the best trading days tend to cluster around the worst ones.

“By its nature, pension saving tends to have a long-time horizon, meaning your portfolio has enough time to ride out the ups and downs of the market. 

“Even if you are in your 50s, you still have an investment horizon of at least 10-15 years, and possibly a lot longer, before retirement and hopefully many happy years in retirement – plenty of time to benefit from long term returns.

“Over the long run, it’s time in the market, not market timing that matters most.”

Simon Jones, CEO of InvestingReviews.co.uk, concurred that market turbulence can often be “alarming”, particularly for those who are nearing retirement.

While the UK, Europe and US will potentially enter recession next year, it is likely to be milder than expected – in welcome news for pension savers.

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Mr Jones told Express.co.uk: “Recessions typically also last a short time compared to the time frame over which most investments are made.

“Investing remains a sensible way to continue building your pension, but you can rebalance your portfolio when shares are falling.

“Selling safe investments like bonds will free up money to snap up shares that are more attractively priced following a fall. When the market bounces, your portfolio should also enjoy a well-earned uplift.”

Many people will be nervous about the current volatility within the market.

However, according to both experts, it is vital individuals do not panic about this, as it could do more harm than good.

Mr Jones said it is important people do not try to second-guess what is going on in the market in attempts to protect their pension, as this is likely to fail.

He added: “It’s almost impossible to correctly spot the bottom, and missing out on the upturn is just as costly as avoiding a downturn. 

“It’s better to stay invested and benefit from the market rallies.”

Mr Norton, however, gestured towards a specific approach which may help nervous pension savers.

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He added: “Maintaining a steady, strategic approach has proven itself time and again—through periods of high inflation, low inflation, bull markets, bear markets and a variety of business cycles.”

It is vital to note pensions involve investment where capital is at risk – and people may get back less than they originally invested.

As a result, it is often considered important for people to seek financial advice before they make any decisions regarding their pension.

Independent, regulated financial advice can often help a person with their specific circumstances and individual goals.

Others may wish to contact Pension Wise, the Government-backed organisation, for free, impartial guidance on their pension if over the age of 55. 

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