Much of the past week has been dominated by scenes of tumbling markets, stressed trading floors and world leaders scrambling after Donald Trump unleashed a barrage of tariffs.
We’re going to take a step back and ask what the chaos means for pensioners, soon-to-be retirees and younger people concerned about their future retirement.
Two different types of pensions – one won’t be affected
Generally, there are two different types of private pensions in the UK: defined benefit (DB, also known as final salary), often used in the public sector, and defined contribution (DC) pensions.
“Those who have a DB pension should be largely unaffected as their payouts are fixed and guaranteed,” Lucie Spencer, financial planning partner at UK wealth manager Evelyn Partners, told Money.
DC schemes are more exposed to the US markets, which have been badly hit.
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But Anthony Ellis, head of DC Investment strategy at Hymans Robertson, had good news on that front: most DC scheme users were in default strategies that would be de-risking the closer you got to retirement.
De-risking means money is moved away from riskier equities and into safer cash and bonds.
The worst affected group
Mark Chicken, chartered financial planner at The Private Office, warned there was a worst-case scenario where some pensioners, or soon-to-be pensioners, either delayed or came out of retirement.
Chicken told Money: “It’s possible people could have to come out of retirement.
“If someone’s pension wealth is 100% invested in global equities… and if their retirement plans were thin, then absolutely.”
This was echoed by Jos Vermeulen, a member of the Society of Pension Professionals Investment Committee and head of solution design at Insight Investment.
He also warned that people could lose as much as 20% of their income if they’re overly exposed to global equities.
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People in their 50s
Those in the middle, say in their 50s, might have seen a largely equity-invested pension take a large hit.
Ellis said: “That’s the cohort who might be most concerned because they might see a 15-20% drop in their funds.
“For those people, the comfort I would give is that if you look back at previous sell-offs, the recovery is usually relatively short.
“With your ongoing contributions, you’re going to average in at a lower price and markets will recover in the full course, so don’t panic.”
What should they do?
“The conversations I am having are: ‘This is really painful. It doesn’t look great. But we were ready for it,'” Chicken said.
“It’s 100% a case of sitting tight and not doing anything dramatic.”
Lily Megson, policy director at My Pension Expert, agreed: “Often, the bigger risk lies not in the markets themselves, but in how we respond to them.”
The overwhelming message from experts we spoke to was to keep calm and carry on.
Ellis summarised: “Most people have a pretty terrible track record of timing the market.
“If you panic and take out your money you’re almost certain not to time it in the best way.
“You’re better off just hanging fire.
“Just carry on and see out this pretty bumpy ride and don’t look at your pension value too much.”
“Don’t knee-jerk panic,” was the message repeatedly expressed to Money.
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Younger people
While a lot of the focus is, understandably, on soon-to-be or already retired pensioners, younger individuals may also be spooked by the turmoil.
“Not to sound flippant in any way, or to dismiss it, but for people in their late 20s, 30s, 40s, the answer is to not worry about this at all,” Chicken said.
Ellis expanded on this, adding that young investors shouldn’t be discouraged from investing in their futures.
All the experts told Sky News that those with decades ahead of them before retirement would see the value recover over that extended period of time.
