How to rescue your pension from Trump’s tariffs – whatever your age: Experts reveal what

Whether you are already in retirement or still decades away, the market turmoil caused by US President Donald Trump’s tariffs announcements last week will have caused havoc with your pension savings. Here’s how it could affect you – and what to about it.

If you’re under 40

The bad news? Of all the age groups, you are likely to have seen the biggest dent to your pension in recent days.

The good news? It probably matters to you the least.

The market turbulence has spread to most types of investments, but company shares – which make up the bulk of younger workers’ pensions – have suffered the most.

As a result, you may well have seen a double-digit fall in the value of your pot in the last week alone.

Yes, uncomfortable, but the best thing you can probably do is…nothing.

Faye Church, senior financial planning director at Rathbones, says: ‘Younger age groups can sit back and close their eyes.

Whether you are already in retirement or still decades away, the market turmoil caused by Donald Trump’s tariffs announcementswill have caused havoc with your pension savings

‘You still have decades until you can access your pension, so you have plenty of time for its value to recover.’

It might be tempting to stop contributing to your pension when it’s doing such a miserable job at protecting – let alone growing – your savings.

But Steven Cameron, director at pension group Aegon, says this is the worst thing you could do.

‘If you stop paying into your workplace pension, the chances are your employer will too, so you will miss out on what is effectively free cash.

‘When you put money into your pension its value is doubled if your employer matches your contributions – and you benefit from tax relief at 20, 40 or 45 pc as well. So you have probably more than doubled your money when you put it into a pension – so you are already up even if you suffer a huge drop afterwards due to volatility in the market.’

In fact, increasing your contributions now could be a sharp move if you have the stomach for it and can afford to. Shares are much cheaper than they were a week ago so you’re buying at a better price.

‘The companies that you are buying into your pension haven’t suddenly become bad,’ adds Church. ‘Their shares have fallen because the market has. They should recover in time – markets always have in the past.’

40-50

If you’re under the age of 47, you still have a minimum of 10 years until you can access your pension. Even then, you may choose to wait. So, you have plenty of time for your pension pot to recover from this latest turbulence.

In previous stock market drops, the recovery has taken months rather than years

There’s no knowing how long it will take as so much is still in flux. We don’t know, for example, whether Trump will stick to his guns, how other countries will react and what investors will do next.

However, in previous stock market drops, the recovery has taken months rather than years. Over the last 10 years, the US stock market has taken four big tumbles, Church points out. The worst was when Russia started a war in Ukraine, and the US market took 24 months to recover. The recovery after Trump launched tariffs in 2018 took six months, the one after Covid struck in 2020 took six months and one in 2023 over global growth concerns took five months. Although we don’t know that this downturn will look anything like previous ones, you would have to be quite pessimistic to think that pensions of those currently in their forties will still be reeling by the time they start to think about retirement.

50-60

The value of your pension may have dropped slightly less sharply than that of younger colleagues. That is because some pension schemes automatically move your savings from riskier shares into less risky government and corporate bonds as you approach your target retirement date.

Now is not the time to make big changes to your portfolio. As Church puts it: ‘When market volatility is wild, as it has been as a result of Trump’s tariffs, investment decisions can be out of date within a couple of hours.’

However, when the dust has settled, it may be a good time to check what you are invested in and make sure it suits your time horizon, appetite for risk and how much you can afford to lose if markets drop again.

If you look at your pension value now and feel queasy, that doesn’t necessarily mean that there is anything wrong. Volatility is all part of investing – there will be highs and lows. But if you still feel unsettled after a few months, you may want to consider your strategy – especially as you reach the last decade of work before retirement.

‘Use this as a reset,’ says Ian Cook, financial planner at Quilter Cheviot. ‘Wait for the recovery and then look back at how you felt during this period. If it made you feel unsafe and unable to cope with the volatility, it may be time to look at alternatives. If, by the time markets have recovered you’ve forgotten all about how you felt now, your risk level is probably okay.’

60 to retirement

If you’re approaching retirement and have not been reducing the level of risk in your portfolio, the stock market falls may have put a big dent in your retirement plans.

You may need a rethink. ‘If you’ve lost a lot of value, you may need to work for longer than you’d planned or to reduce the amount of income you plan to take from your pension or perhaps draw income from other sources if you have them,’ says Church.

You may also want to hit pause on plans to take your tax-free lump sum. After all, the value of that sum is likely to have dropped and taking it now crystalises that loss. ‘If you had been planning to take it, but don’t have any particular plan for what to spend it on, having a rethink is not a bad idea at a time when most people would consider it a bad time to take a large sum from your pension,’ Cameron explains.

However, if you have been reducing the risk in your portfolio – or it has been done automatically by your pension provider – you may not have lost much value in recent days and your retirement plans may well be on track.

Big stock market falls only tend to be a problem if they occur right before you plan to take money from your pension.

If you intend to keep most of your pension invested in retirement and only draw an income when you need it, you will still have decades until you need to access great chunks of your pension and therefore plenty of time for it to recover.

The exception here is if you plan to buy an income for life, known as an annuity.

Financial adviser and annuities expert William Burrows warns that those looking at buying one now face a ‘double whammy’ of bad news. ‘Unless you’ve been reducing the risk in your pension, its value will have fallen so you’ll have less money to turn into an annuity,’ he says. ‘On top of this, although annuity rates are higher than they have been for years, they are likely to start to fall.’

Pension savers face a difficult choice: do they wait for their pension pot to recover and hope that annuity rates have not fallen too hard in the interim, or do they lock in an annuity now?

Burrows says there’s not an easy answer, and part of the decision will be psychological – in other words, what makes you most comfortable.

It may be a good time to seek financial advice as this is a complicated, life-changing decision. Similarly, those worried about the level of risk in their pensions as they approach or are in retirement may benefit from expert advice.

Annuity rates are closely aligned with the yield on government bonds as it is these financial products that annuity providers buy with your pension pot to pay you an income for life.

Burrows advises that savers who are considering an annuity keep an eye on the 15-year gilt yield as an indication of which way annuity rates are going. You can find a number of sources for this information by typing ‘UK 15-year bond yield’ into an internet search engine. ‘They are currently just a shade under 5 pc. As a rule of thumb, for every percentage point fall in the yield, annuity rates fall by around 10 pc,’ he explains.

In retirement

If you have a final salary pension, annuity or rely predominantly on the state pension, your income will not be affected as you are guaranteed a certain yearly sum for life.

But if your pension is still invested, you have probably taken a hit and may want to rethink how you manage your money.

Firstly, this is unlikely to be a good time to take a large chunk from your pension if it means selling shares that have plunged in value.

You may want to hold fire on cashing in to pay for that cruise.

‘Say you have a cruise or big holiday coming up in a year that costs £12,000, you may have planned to increase your monthly pension withdrawals by £1,000 a month so you had all the money to pay for it,’ says Cook. ‘Instead, you may be better off waiting until closer to the time and taking it out in a lump sum. Don’t forget tax, though – market volatility is never the only consideration.’

Similarly, if you’ve started to take a higher income from your pension to gift it to loved ones ahead of rule changes in 2027 that will mean pensions may attract inheritance tax, you may want to think again if it means selling shares when their value is down.

And if you had planned to take money from your pension to gift to loved ones, check you can still afford it.

‘A financial adviser will be able to do a cash-flow model for you, looking at how much you have saved and how much you need to spend to determine if you need to change your plans,’ says Cook. ‘For example, you may need to reduce that £100,000 gift to your children to £75,000 or reduce the monthly income you take.’

He adds that savers may decide to draw on investments that have not fallen in value and leave those that have invested to recover. ‘Then, once markets have eventually recovered, you can rebalance your portfolio again.’

Financial advisers tend to recommend that retirees have a sizeable cash buffer from which they can draw an income when markets drop so they are not forced to sell investments when they are down. If you have cash, now might be a good time to lean on it.

And finally, if you have so much saved that you never risk running out, don’t worry and carry on.

[email protected]