Are pensions affected by the stock market? In recent weeks, global stock markets have been rattled by the announcement of new tariffs by U.S. President Donald Trump, sparking fears of economic instability. While the headlines may feel distant, their impact can hit closer to home, especially when it comes to your pension.
If you’re wondering how events like these affect your retirement savings, you’re not alone. For many in Ireland, especially those with occupational pension schemes, the stock market plays a key role in the performance of their pension pot.
This article will walk you through the connection between pensions and the stock market, the risks involved, and what Irish savers can do to protect their long-term retirement goals.
Whether you realise it or not, your pension fund is likely invested in the stock market. Especially if you’re in a defined contribution pension scheme, the value of your retirement savings goes up and down based on the performance of financial markets.
Your money is often spread across a mix of:
Younger pension savers tend to have more of their funds invested in equities for higher long-term growth, while older savers are often shifted into lower-risk, lower-return assets like bonds as they approach retirement. This shift is part of what’s called “lifestyling”, a common feature in many Irish pension plans.
If you’re in a pension scheme and never chose how your money is invested, you’re probably in your provider’s default investment strategy. In Ireland, this usually means you’re in a lifestyling model.
Lifestyling automatically adjusts your pension investments based on your age. Early in your career, your pension is put in higher-risk, higher-reward assets like global equity funds. As you near retirement, the fund shifts into more stable assets like bonds and cash.
This makes sense if you’re planning to buy an annuity (a fixed income for life from an insurance company) at retirement. But here’s the problem…
Most Irish retirees today don’t want an annuity. They want flexibility and the ability to leave money behind to their families. That’s why many people choose an Approved Retirement Fund (ARF) instead.
An ARF allows you to keep your pension money invested after retirement and draw an income of around 4–6% each year. Any money left over when you die can go to your beneficiaries. It offers flexibility and the potential for continued growth, but also comes with investment risk.
Here’s the catch: if your pension fund was shifted into low-growth assets before retirement (as part of a lifestyling plan), it may not perform well enough to support you for the 20–30 years you’re expected to live in retirement.
Research shows:
The difference? Growth. Equity-heavy investments tend to recover and grow over time, while overly cautious portfolios can stall, especially when you’re still drawing from them in retirement.
It’s not a simple yes or no. There are important questions to ask:
If you’re more than 10–15 years from retirement and expect to use an ARF, you might want to reconsider your default investment strategy. Leaving your money in low-growth funds could mean less income—and more risk—in the long run.
Speak to a qualified financial advisor or your pension provider. Ask:
Some Irish default funds have underperformed compared to global passive portfolios. For example:
Yes, tariffs and political events can rattle markets. But switching funds every time there’s a dip is like changing lanes in traffic, more stress, not more progress. Stay the course, review regularly, and focus on the long-term.
While stock markets will always experience ups and downs, pension investing is about long-term growth. Sudden changes in policy, like tariffs or interest rates, may cause short-term drops, but history shows that markets tend to recover over time.
In Ireland, where retirement planning is becoming more important than ever—with auto-enrolment set to include more workers—it’s essential to make informed decisions.
Your pension may be affected by the stock market, but how you respond matters even more. Don’t leave your retirement to chance or default options. Take control, get advice, and ensure your pension works for you, not just for the average saver.
At Fairstone, we offer expert retirement planning advice tailored to your specific needs and goals. Whether you’re years from retirement or approaching the finish line, our team can help you make confident, informed decisions. Book your no-obligation retirement planning consultation today.
Related articles:
Trump’s Tariffs Reversal and the Bond Mark Response
Why Diversification is Important for Your Investment Portfolio?
Sources:
Risk of Ruin…Lifestyle & Default Investment pension Strategies
