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The global economic downturn has had a significant impact on the pension market in the United Kingdom. The stock market crash during the recession reduced the value of pension funds, resulting in a significant reduction in many people’s pensions.

Although this may appear to be a nightmare scenario, there is still hope that your pension will not be lost entirely. Many of the steps you must take after a stock market crash are similar to those you would take if you were considering transferring your pension plan. In this article, we’ll go over all of the steps you need to take in this new period to avoid the effects of the 2022-2023 recession.

Watch our video for a step-by-step guide on how to protect your pension during this economic downturn.

Recession and Market Volatility

In fact, both positive and negative market volatility can have a significant impact on your pension assets. If the market performs well, your pension assets may increase in value, potentially increasing your retirement savings. If the market falls, your pension assets may decrease, potentially reducing the amount of money you have available for retirement. 

Market volatility can also have an effect on the value of your investments, resulting in fluctuations in the value of your pension assets. This can lead to a loss of confidence in your retirement savings, which can lead to financial anxiety.

As previously stated, the stock market’s decline impacted individuals’ confidence in investing in pension plans, resulting in a decrease in the number of new pension plans purchased. Furthermore, the recession increased the number of businesses that were unable to continue contributing to their employee’s pension plans, leaving many workers with reduced pensions.  

CETV Value to Crash?

DB pension and CETV, as well as market volatility, form a triangle that cannot be separated. When the value of the market falls, the value of your CETV falls with it. During a recession, the value of pension funds’ investments may fall, resulting in a decrease in the CETV value offered to retirees.

Furthermore, as unemployment rises during a recession, the number of people contributing to the pension fund may fall, resulting in a further decrease in the CETV value.

Remember that the Cash Equivalent Transfer Value (CETV) is a calculation used by UK pension schemes to estimate the value of a member’s pension benefits if they leave the scheme. It is calculated using the scheme’s expected future payments, taking into account factors such as inflation and investment returns.

Market volatility refers to the price fluctuations of assets in financial markets. Because investment returns are a significant factor in the calculation, this can have a significant impact on the value of CETV. If the market is volatile, the value of the investments held by the pension scheme may fluctuate, resulting in a change in the CETV.

In general, during times of high market volatility, the CETV may be lower than expected due to lower investment returns. This means that if the member chooses to transfer their pension benefits out of the scheme, they may receive a lower transfer value.

As a result, when seriously considering a transfer, it is critical to consider the impact of market volatility on the CETV, as well as the benefits of remaining in the scheme. This can include factors such as the security of guaranteed benefits, the advantages of being a part of a large pension scheme, and the advantages of having an inflation-adjusted pension.

A recession, in addition to these financial factors, can have an impact on the stability of the pension fund itself. During a recession, companies may go bankrupt, causing a significant reduction in the pension fund. If the company that provides the CETV pension goes bankrupt, employees’ pensions may be reduced. 

What Should I Do If I Already Have A UK SIPP in Place During the 2022–2023 Recession?

Transferring a DB pension into a SIPP during a market crash may appear to be a disastrous event, as the current value of your SIPP investment appears to be reduced. However, keep in mind that while recessions can be difficult, they are a normal part of the business cycle.

A Self-Invested Personal Pension (SIPP) can be a valuable tool for saving for retirement, but it is also vulnerable to market fluctuations, including a recession, like any other investment. You can take the following steps to reduce the impact of a recession on your SIPP pension:

  • Diversify investments: One of the benefits of a SIPP is that it allows you to invest in a range of assets, including stocks, bonds, and property. It’s important to diversify your portfolio to reduce the impact of any one investment on your overall portfolio.
  • Consider alternative investments: in times of uncertainty, alternative investments such as commodities or infrastructure projects can provide stability.
  • Stay invested. It can be tempting to pull out of the market during a recession, but this can actually increase your losses. Historically, markets have recovered from recessions, and staying invested can allow you to recover your losses when the market does recover.
  • Review your investments regularly – Regularly reviewing your portfolio and making any necessary changes can help ensure that your investments are aligned with your goals and risk tolerance.
  • Don’t panic: The first thing to remember is to stay calm and not panic. This is a common reaction during a market crash or recession, but panicking only leads to making irrational decisions.
  • Avoid making hasty decisions: Don’t make hasty decisions during a market crash or recession. It is better to wait and let the market stabilize before making any moves.
  • Seek professional advice: If you are concerned about the impact of a recession on your SIPP pension, seeking professional financial advice can help you understand your options and make informed decisions.

During a market crash or recession, it is essential to remain calm, monitor your portfolio, diversify your investments, avoid making hasty decisions, review your investment strategy, and seek professional advice if needed.

Should I Transfer My DB Pension During Recession?

Transferring a defined benefit pension in a market crash or recession may be a difficult decision. It is recommended to consider the following factors before making a decision:

  • Timing: If the market is already in a crash or recession, it may not be the best time to transfer the pension. The transfer value may be lower compared to transferring when the market is stable.
  • Risk tolerance: Transferring the pension to an investment-linked scheme may bring higher risks. You should consider your risk tolerance before making a decision.
  • Transfer value: The value of the pension transfer may be affected by market conditions. In a crash or recession, the transfer value may be lower compared to a stable market.
  • Financial goals: Before making a decision, you should consider your financial goals and determine if a transfer will help you reach those goals.
  • Expert advice: It is recommended to seek the advice of a financial advisor or a pension expert before making a decision. They can help you understand the pros and cons of a pension transfer and provide you with personalized advice.

Transferring a defined benefit pension in a market crash or recession is a complex decision that requires careful consideration of various factors. It is always advisable to seek expert advice before making a decision.

Navigating the Pension Crisis: What to Do After the 2022-2023 Stock Market Crash

The global economy experienced a recession in 2022–2023, which led to a significant decrease in the stock market. This resulted in many people experiencing losses in their investments, including pension plans. If you transferred your pension during this period, it’s possible that its value decreased.

However, the stock market is unpredictable, and past performance is not indicative of future results. It’s best to consult a financial advisor for personalized advice and consider factors such as your risk tolerance, investment goals, and timeline. Don’t wait any longer, take control of your financial future today. Book a free consultation with one of our qualified IFAs to discuss how to best protect your pension plan and make informed decisions for a secure financial future.


Dominic James Murray

My career in financial services began in 2010 during my Bachelor of Science (BSc) Undergraduate degree at Aston University in England. The degree required me to spend a year abroad working with an established organisation.

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