Pension Value Ups and Downs Simplified

  •  By
  •  Murray Humphrey

Imagine this: You’re sipping your morning coffee and decide to check your Penfold app for a quick pension update. But wait, what’s this? Your pension pot has decreased in value! Before you spill your coffee in dismay, let’s take a calming stroll through what’s really happening with your pension.

Why Did My Pension Pot Shrink?

Here’s the scoop: Let’s remember that a big chunk of your pension is invested, not just sitting in a savings account. Every contribution you make buys ‘units’ in your chosen pension fund, akin to building blocks in your financial construction project. These blocks, or investments, include things like stocks, bonds, or even cash. But here’s the twist: the size of each block can change based on how these investments perform.

The value of your defined contribution pension boils down to two things:

  • Your (or your employer's) contributions
  • The performance of your pension fund

Think of investing in a fund like planting a garden. Sometimes it grows rapidly, other times it faces harsh weather. But overall, it’s meant to bloom, giving you a lush retirement and keeping the pesky weeds of inflationat bay. If the investments in your pension fund face a storm (read: drop in value), your pension pot might temporarily shrink. This could be due to stock market trends, economic downturns or new political policies. But remember, a garden doesn't stop growing after a storm.

What Should I Do If My Pension Value Drops?

First, don’t hit the panic button. It’s like seeing your garden under a bit of rain – it’s all part of the process. If you try to move your money during these times, you’re basically pulling out your plants before they’ve had the chance to recover and flourish.

While your money is invested, any losses are like paper cuts – they sting but they heal. They only become ‘real’ wounds when you withdraw or move your money. In many cases, just giving your garden – I mean, your pension pot – time to recover is the wisest move.

At Penfold, we’re as transparent as a freshly cleaned window, especially about our pension performance. You might notice the ups and downs more often, but think of these as the rhythm of the financial world. A single month of underperformance in the grand scheme of 20, 40, or even 50 years of saving is like a single rainy day in a year of seasons. Investing is a marathon, not a sprint.

Penfold Fund Performance

Line graph titled "Penfold Standard Plans," showing the performance of four levels of standard investment plans from July 2019 to December 2023. The lines depict fluctuations with a general upward trend in recent months.
A multi-line graph titled "Penfold Sustainable and Sharia Plans," comparing the performance of different investment plans, including Sustainable Plan Levels 1, 3, 5, and a Sharia Plan from September 2020 to December 2023. The lines depict fluctuations with a general upward trend in recent months.

Take a look at the charts above. It’s like a timeline of a garden through various seasons. You’ll see a few winter moments, but notice the spring rebound! History shows us that recovery is a common trend. If you had moved your money during the winters of December 2018 or June 2020, you would’ve missed the ensuing springs.

What If I’m Close to Retirement?

If you’re nearing retirement, it’s like preparing your garden for a potentially harsher climate. You might want to shift to a less volatile plan, like our Lifetime Plan, which adjusts automatically as you approach retirement. This means your garden should be more protected and ready for a smoother transition.

Could I End Up with Less Money Than I Started With?

It’s natural to wonder if a rainy season could turn into a flood, leaving you with less than you started. But here’s some reassurance: while all investments, including pensions, come with some risk, history shows us that diversified investing over the long term has an incredibly low chance of diminishing your initial investment. In fact, it’s more likely to outpace traditional savings methods.

Consider this:

  • The Financial Conduct Authority (FCA) tells pension providers how they must calculate the potential future value of pension accounts for use in illustrations. Because future investment returns are uncertain, we generally use three scenarios of projected growth; high, mid and low. The FCA sets the maximum percentages to be used for each of 2%, 5% and 8% per year.
  • At Penfold, our most popular plan has seen an average yearly growth of 4.6% from inception to September 2023.
  • Using a 5% average, a monthly contribution of £250 over 40 years could see your pension grow to nearly £200,000, thanks to the magic of compounding. Remember, in the world of pensions, time is your ally.

While it’s important to acknowledge the risks, it’s equally crucial to recorecognisegnize the potential for long-term growth.

Why Are Pension Funds Dropping?

Sometimes, the financial weather affects everyone – like during the global Covid pandemic or the Ukraine conflict aftermath. These events can cause temporary dips in pension funds and other investments worldwide. But remember, pensions are a marathon, not a sprint. Over the long haul, the market has shown a tendency to recover and grow.


Your journey to retirement is filled with ups and downs, but remember, it’s a rewarding path. Stay informed, stay calm, and remember, time is your ally. If you ever feel uneasy or have questions, Penfold is here to help you navigate through.

As a reminder, here’s a simple checklist to follow if your pension pot value dips:

  • Stay Calm: Remember, pension investments are a long-term game.
  • Resist Urgent Changes: Avoid making hasty decisions like withdrawing your money.
  • Understand the Nature of Markets: Small drops are common and usually recover over time.
  • Stay Informed: Keep an eye on your Penfold app for updates and insights.

In conclusion, seeing your pension pot fluctuate is like watching the natural ebb and flow of the tides. It’s part of the journey towards a fruitful retirement. At Penfold, we’re here to guide you through these fluctuations, ensuring you’re well-informed and ready for whatever the financial weather brings. Remember, sometimes the best action is no action – just keep calm and carry on saving!

For personalised help or more information, feel free to contact us or explore our other news and insights.

As with all investments, your capital is at risk. Past performance is not a guarantee of future performance. This article is not intended to be financial advice.

A photo of Murray Humphrey

Murray Humphrey


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