Money
Pensions
How safe is your pension?
Billions of retirement savings are invested in the stock market and the value of company and personal pension funds has taken a hit with the dramatic drop in the FTSE 100, writes Holly Thomas
Many people will be concerned that their nest eggs are at risk, particularly those approaching retirement.
Those within five years of their scheme retirement age should find that a proportion of their money has been already been switched out of riskier areas and into safer investments.
Many private and group pensions offer a feature known as "lifestyling" which automatically moves a chunk of money each year away from equities, and into such as fixed interest and cash. This is done specifically to avoid any large losses if the market falls - as in the past week - close to retirement.
"As people near cashing in their pension, it makes sense to increase the balance of cash in portfolios to reduce the risk of losing money close to when you need it," said Danny Cox at independent financial advice firm Hargreaves Lansdown.
He said: "Investors may want to check that they have selected lifestyling for their pension, whether it's an employer scheme or a personal pension. Many people may have overlooked it so this is a stark reminder to ensure it is in place."
Self-invested personal pensions (Sipps) do not come with a lifestyling option and so Cox recommends reviewing portfolios in the light of the market changes.
For those still years away from retirement, advisers are urging people not to make any changes to their pension without advice.
Cox said: "It is important not to make any quick-fire decisions in times of market volatility as you could lose out.
"Pensions are invested in the stockmarket because over the long-term equities outperform other asset classes."
A statement from the National Association of Pension Funds echoed advice not to panic.
Chief executive Joanne Segars said: "Pension funds are long-term investors and will set their funding strategies in accordance with their long-term liabilities, not short-term market moves, so there is no reason to think that the recent stockmarket falls will have a significant impact on pension provision."
For those in a final salary scheme, benefits are guaranteed by the employer, although some are in deficit.
Many pension investors, particularly those in group personal pensions and other plans, pay into their funds monthly.
This averages the cost of their investment over the year, and means that when markets fall they buy in at a lower price. This is known as "pound cost averaging".
