I’ve spent years watching markets swing and wondering how the people I talk to—colleagues, friends, readers—can sleep at night knowing their retirement savings might be tossed around by a headline or a central bank decision. As someone who follows business and markets closely, I’ve also had to think practically about my own pension. In this piece I’ll walk you through the realistic, actionable steps I take and recommend to help a pension survive market shocks.
Accept volatility, then plan around it
First, a mindset note: volatility is normal. Prices go up and down. If you treat every dip as a catastrophe, you’ll make bad decisions—selling at the wrong time, missing rebounds, or choosing overly conservative investments that won’t keep pace with inflation.
That said, accepting volatility doesn’t mean being passive. I separate emotions from choices by defining clear rules and a plan. For me and many readers I’ve advised, that starts with a written retirement plan: target retirement age, expected retirement spending, current savings, projected contributions, and a rough target allocation. Having the plan on paper (or in a spreadsheet) makes it easier to act sensibly when headlines scream.
Know your timeline and risk tolerance
How long until you’ll need the money is the single biggest determinant of what you should do. If you’re 20 years away from retirement, a market shock is a painful blip but not a terminal event. If you need income next year, a shock is immediate and dangerous.
I run a quick “time-to-need” check whenever I review someone’s pension: list your major financial milestones over the next 10 years (house purchase, tuition, retirement income start). For each milestone, mark whether the money is flexible. Money needed within five years should be in lower-risk holdings or cash equivalents. Money needed after 10–15 years can generally tolerate more equity exposure.
Diversify sensibly — not just by name
Diversification is commonly preached, but many people confuse it with owning a handful of big-name funds. Real diversification means spreading risk across asset classes, geographies, styles and strategies. Here’s what I check:
- Equities vs bonds: a mix tuned to your timeline. Younger savers often benefit from more equities; near-retirees need more bonds.
- Geographic spread: don’t have all equity exposure to your home market. Emerging markets, developed ex-local markets and global funds reduce concentration risk.
- Asset-type diversification: include government and corporate bonds, inflation-protected securities (e.g., TIPS or index-linked gilts), cash equivalents, and where appropriate, alternative assets like real estate or commodities.
- Manager and style diversification: holding both passive (index) and active managers can smooth returns; value and growth styles perform differently across cycles.
Practical tip: low-cost global funds such as Vanguard’s LifeStrategy or iShares Core World plus a UK gilt or inflation-linked bond fund can give broad coverage without complexity.
Use staged de-risking (glidepaths)
One of the soundest tactics I recommend is staged de-risking—gradually shifting from higher-risk assets to lower-risk assets as retirement nears. Many target-date funds do this automatically, but you can adopt the same principle manually.
Example glidepath I use as a baseline (adjust to your situation):
| Years to retirement | Equity allocation | Bond/cash allocation |
|---|---|---|
| 15+ years | 75–90% | 10–25% |
| 5–15 years | 40–75% | 25–60% |
| 0–5 years | 20–40% | 60–80% |
This is not a prescription but a framework. If you’re risk-averse or your pension is your sole income, shift earlier and more conservatively.
Build a near-term cash or bond buffer
One mistake I see is people keeping everything invested and then being forced to sell into a downturn. I recommend a liquidity buffer: enough cash or ultra-short bonds to cover 1–3 years of expected retirement income or major near-term needs. That way, if markets fall near your retirement date you don’t have to realize losses to pay bills.
Examples of buffer vehicles: high-yield savings accounts, fixed-term accounts, money market funds, or short-duration bond funds. Platforms like Marcus by Goldman Sachs, Barclays Online Saver, or money market funds from Fidelity or BlackRock are worth comparing for rates and access.
Consider annuities and guaranteed products carefully
Annuities provide guaranteed income which can be attractive in a downturn because they remove market risk on that slice of your pension. But annuity rates vary with interest rates, and inflation can erode fixed annuities. If you value security, you might lock part of your pension into an inflation-linked annuity or ladder multiple deferred annuities to stagger purchase dates.
Tip: shop around. Use comparison sites and consult a regulated financial adviser before buying an annuity—rates and features matter. Companies such as LV= or Aviva in the UK are big players, but independent advisers can point to competitively priced products too.
Rebalance and use contributions as a stabiliser
Market shocks create buying opportunities. I rebalance my portfolio at least annually and use regular contributions to buy more of what’s fallen rather than sell winners. This is the essence of disciplined investing: when prices drop, your regular pension contributions automatically buy more shares, lowering your average cost over time.
Automated monthly contributions via workplace pensions or SIPP providers (e.g., Hargreaves Lansdown, AJ Bell, Vanguard Investor in the UK) keep you invested through cycles. When volatility spikes, I try to avoid fiddling unless my underlying plan needs changing.
Understand fees and tax wrappers
Fees erode returns more in bad markets since you’re compounding on a smaller base. Review fund charges and platform fees regularly. I prefer low-cost index funds or ETFs for core exposure and use active funds selectively where they provide clear value.
Also maximise tax-efficient wrappers: workplace pensions, personal pensions and ISAs (where relevant) protect more of your returns. Use annual allowance efficiently—losing tax relief or forgetting to claim carry-forward can be costly.
Keep learning, and get professional help when needed
Markets and products evolve. I keep up with central bank moves, fiscal policy changes, and major structural shifts (like rising interest rates or inflation) that affect pension strategy. But you don’t have to become a market expert to act sensibly.
If your pension pot is large, or your circumstances complex (multiple pensions, DB schemes, inheritance considerations), consult a regulated financial adviser. Look for advisers on the Financial Conduct Authority (FCA) register in the UK, and ask about their fee structure and experience with retirement planning and risk management.
Behavioural rules I follow
- Rule 1: I don’t make portfolio changes based on headlines alone.
- Rule 2: I rebalance annually and review glidepath assumptions every 2–3 years.
- Rule 3: I maintain a 1–3 year cash/bond buffer when retirement is within 5 years.
- Rule 4: I automate contributions to capture pound-cost averaging.
Protecting your pension is part technical, part behavioural. You can’t stop market shocks, but you can design a pension strategy that tolerates them—and even benefits from them over time. If you want, I can walk through a sample allocation for a specific age or time horizon in a follow-up article or answer questions about particular products and platforms.
