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Don't panic!
The current turmoil in financial markets may be worrying to those of you who are saving in defined contribution pension plans.
So, what should you do?
Above all, stay focused
Pensions are long-term savings. Consider very carefully any financial decision; don't react to media reports and speculation. Think about your long-term investment goals rather than the short-term fluctuations you are seeing now. Don't focus on day-to-day dips but view your investments over a much broader time frame.
Don't panic. If you do, you may resort to making impulsively rash decisions, which could easily leave you worse off in the long run. Even if you have seen a drastic reduction in your fund value, all is not lost. If you are 10 years or more away from retiring, you will still have some time to make up for this fall. In fact, when prices fall you benefit from buying a greater number of units.
You could consider spreading your money across different types of investment such as cash, bond and equities or diversifying your funds so that you are invested in overseas markets. Remember that cash may not be a good option over the long-term as the purchasing power is eroded over the years by inflation.
Try to stay committed to your personal financial plan for your retirement. Consider other savings and investments. A pension is not the only way to save for retirement.
Approaching retirement
If the market is down you may need to think about postponing your retirement plans or going for partial retirement. You may need to think about buying a pension later than anticipated and carry on working.
It's important that you move your funds to more stable investments like bonds and cash. Some pension plans do this for you automatically. However, if you've had a big loss recently you may want to consider carefully if you want to consolidate that loss by moving it.
Don't stop saving
Of course, you may find that you are simply unable to afford to continue to make pension contributions and don't see pension saving as a priority. However, even if your pension fund hasn't performed well, and is only the same amount as what was paid in, you will probably still be making a return because of the tax relief on your contributions and any contributions paid in by your company.
Why not review your contributions, rather than stopping altogether? If you give up making contributions entirely you may never start again!
Source: Time For Money