Middle East conflict and what it means for your employees’ pensions

Recent events in the Middle East have caused some uncertainty in global financial markets. Over the weekend, military action between the US, Israel and Iran led to sudden movements in markets around the world. 

Some areas of the market have been affected more than others. For example, airline and travel company shares fell, while energy and defence companies tended to rise. Oil and gas prices also increased because of concerns about supply disruption in the region. Bonds have remained relatively stable so far.  

What this means for your employees’ pension

Short-term market movements are a normal feature of investing, particularly during periods of geopolitical tension. While daily market headlines can be unsettling, your workplace pension scheme is designed with a long-term investment horizon in mind, reflecting the fact that retirement saving typically takes place over many years or even decades. 

Because of this, shortterm market ups and downs don’t usually have a big impact on longterm retirement outcomes. 

Pension investments are designed to cope with periods like this. Our pension funds invest across a wide range of companies, countries and types of investment, rather than relying on one area alone. This helps spread risk and smooth out bumps along the way.

Why staying the course matters 

History shows that reacting quickly to worrying headlines - for example by stopping contributions or switching investments during a market fall - can often do more harm than good. Selling investments when markets are down can lock in losses and mean missing out when markets recover. 

Employees who continue to save regularly and stay invested are usually better placed over time. Markets have gone through many periods of uncertainty before, and while no one can predict the future, they have generally recovered over the long term. 

Key messages you can share with employees 

While markets may continue to be unsettled in the short term, there is no need for panic or rushed decisions about workplace pensions. When talking to employees about their pensions during times like this, it can help to reinforce a few simple points: 

• Ups and downs are normal
  Markets move all the time, especially when there is unsettling news. 
• Pensions are long term
  Daytoday changes matter much less when you’re saving over many years. 
• Pension funds are diversified
  Investments are spread across different areas to help manage risk. 
• Staying invested is usually best
  Trying to time the market can be risky and may reduce longterm returns.  

Sharing information with your employees  

If you’d like to reassure your employees, you can point them to our market volatility explained page on our website.