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Dear Becky,
I am retired, and I check my online pension about three times a day. It makes me anxious when I see the fund value drop even slightly.
I am aware that values change but I am trying to plan my retirement and how I take an income, and these fluctuations can have an impact on my workings for how much I can take and when.
I would actually say I am a bit addicted to checking my pension.
How often is it advisable to check it, and is there actually a point when it’s reasonable to panic?
Peter
Dear Peter,
“Pension addiction” is a thing. We live in a world where more people are retiring with defined contribution (DC) pensions, which change in value according to the investments held within them, unlike the defined benefit (DB) kind, which pay a set amount and so do not come with the same anxiety.
With DC pensions, fund values mean a lot. If your pot size is modest and is all you have then fluctuations can produce an acute kind of stress, particularly right at the start of retirement, and especially among savers who have perhaps not been exposed to the vicissitudes of global stock markets before.
In fact, it can be stressful for anyone, even for seasoned investors and those with bigger pot sizes that mean they can afford to lose a few thousand pounds.
The constant fear that market fortunes may turn against you at the wrong time, such as just before a chunky withdrawal, together with the constant hope that the opposite might have occurred and now is the time to book that holiday, mean that pension management is actually about emotional management, too.
Pension addiction comes about because the stakes are high. It’s also partly a result of awareness that you have to manage your pension on your own (if you don’t have an adviser, as two thirds of people accessing their pension for the first time do not, according to the Financial Conduct Authority). This can come with a feeling that you don’t know what you are doing and that you have no power over it anyway.
You become acutely aware that this pot has to last an indeterminate amount of time. You become aware that real world things you want or need in the coming years correlate with an amount that can disappear from or appear in your pot in a single day – a new car, for example.
And you become aware there are so many “what ifs”. What if I live to 110? What if the roof collapses and needs £30,000 of repair work? What if there’s a stock market crash right before I take out my 25pc tax-free lump sum?
Watching a pot rise and fall daily only contributes to an often mortifying realisation that even small-sounding percentage changes can make a big difference to your financial outlook.
I hear more and more people say they feel like they are checking their pension way too often, but they can’t help themselves. They are fascinated, hopeful and scared. It’s also so much easier to check in on your pension these days, with online and app-based access being increasingly common.
Transparency and access are a good thing, and important, but if we struggle to tolerate risk and haven’t mastered the ability to rationalise market ups and downs as normal and to be expected over the long term, then obsessing and feeling unduly emotional can become normal, too – and that’s less of a good thing.
The risk of a pension becoming an obsession is heightened naturally by being in retirement, and possibly having that bit more time on your hands. But it’s not just a phenomenon among retired people – workers who are busily contributing also report an inability not to give in to the temptation to check too regularly.
Being completely dependent on the stock market can feel scary because we have no control over it. So, to echo the kind of advice you might get from a therapist when you feel your life isn’t in your own hands, it can be helpful to focus on the things about your pension that you can control: the fees, the investment plan itself and how much you are withdrawing.
Keeping things as tax efficient as possible is another thing that can be beneficial. Doing your homework on things such as managing risk in drawdown may be a better use of time than repeatedly checking in on your fund value. Then, once you’ve nailed the controllables, you may feel less concerned by what you can truly do nothing about.
In terms of how often is the right amount to check your pension value, I’d say daily, or multiple times a day, is too often.
If you are still building up your pension through work, then really, annually may be enough. If you are approaching retirement (that is, within five to 10 years), you would understandably want to check in a bit more frequently, particularly if you are making last-gasp efforts to boost your pot size and want to see the difference it is making, or if you are thinking about how much you might want to move into drawdown, and when.
Another reason to check in on your pensions is if you want to make any changes, either to the provider, the plan or investments within the plan.
If this applies, I would urge you to do your research slowly and think carefully before making those changes. It’s good to try and avoid doing anything in a panic, for instance changing investments or selling out of something immediately after it has gone down in value.
Crystallising losses when you don’t need to is a real risk for those who are worried about stock market falls affecting their retirement plans. Moving to a different plan with a higher fee, which you then can’t leave without paying another fee, can be a common but costly mistake.
Being dependent on a defined contribution pension is an exercise in composure. And if you must check every day, you may need lots of it.
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