Can my personal pension lose money?

I’ve recently found out how much I have in my pension think it might be sufficient but it is very tight. I’m a few years away from retirement and worried it could go down. Can pensions go down or only up?

Question asked by Shane Goodman
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Answered by Andrew Jenkinson

Final Salary Pensions

Pension benefits held in a final salary scheme are protected by the Pension Protection Fund (PPF) which means you will benefit from pension compensation payments if your employer runs into financial difficulties. You’ll usually get 100% compensation if you’ve reached the scheme’s pension age, or 90% if you’re below the scheme’s pension age.

Defined Contribution Pensions

If you hold a money purchase pension, there is a risk that the fund(s) your pension invests in could fall in value depending on how the underlying assets perform. Before investing in a particular fund, look at the track record of the fund and sector. This will give you an indication of the volatility of the sector. Remember that past performance is no guarantee of future performance.

If you are unsure it often makes sense to speak to a specialist pension adviser. If you’re concerned about your pension losing money before retirement then your adviser may suggest less volatile funds, such as a bond or cash fund (some pension schemes include what is called ‘lifestyling’ which automatically reduces the risk profile of your funds as you approach retirement).

If your pension provider can’t pay you because it’s in financial trouble, provided it is authorised by the Financial Conduct Authority (FCA), you can get compensation from the Financial Services Compensation Scheme (FSCS).

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This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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