Thousands of pension contributors across Bermuda have been disturbed to see that the value of their retirement funds diminished during the first six months of the year.

The US property slump, sub-prime mortgage debacle and credit crisis have made for a difficult investment environment. The Dow Jones industrial average, for example, has fallen around 18 percent from its record high last October.

Many local pension funds have also dropped, causing particular concern for those nearing retirement.

The message from two of the Island's largest pension providers yesterday was: "Don't panic."Martha Myron, a senior wealth manager with Argus Financial Ltd. and a personal finance columnist for The Royal Gazette, said: "There have been five years of really good returns and people got comfortable with that. Now we are seeing the other side of it .

"If you are 30 or 40 years old, then you're going to see three or four more business cycles before you retire. If you look at the last bear market, which lasted so long, those who hung in there saw their gains come back."

The fall in the markets is particularly painful for those close to or at retirement age, some of whom have seen their retirement nest egg shrink in recent months.

As for what those people should do, there was no single right answer, Ms Myron said.

"Everybody's in a different situation and you have to sit down and look at everything," Ms Myron said. "It's dependent on how much cash you need right now, whether you are still working part-time, whether you have rental income, etc."

The more flexibility you have in your finances, the better you will be able to deal with hitting retirement in a bear market, she said.

"You can sum up your retirement needs with the four pillars," Ms Myron added. "First, you need to have some liquidity (an immediately available pool of cash).

"Secondly, something for the long term, in case you live into your 90s. For some people, this might be only ten percent of their funds, invested more aggressively for the long term.

"Third, you need a pay cheque, a regular source of income. This could be an annuity, rental income or a part-time job. Then you need your core portfolio, invested for capital preservation."

Bryan Popp, vice-president, customer care and sales at another major pension provider, the BF&M Insurance Group, said: "My advice is not to panic we've been through this before. And remember that we're all in the same boat, everyone's invested in the markets.

"In fact, I'd say that now is the time to put additional funds into their investments. Masses of people tend to put money in at the top of the market."

History showed that investing in a market at a low point offered a better chance of long-term growth, he added.

As people moved closer to retirement, they tended to move more of their money into conservative investments, he added.

"When people retire, they tend to buy an annuity, which is fixed for life," Mr. Popp added. "So when interest rates are low, as they are now, an annuity does not pay as well as when rates are higher.

"What I would advise people to do is to look at opening a drawdown account, as well as having an annuity. You can take a portion of the income from your drawdown account, and keep the money in it invested, until interest rates are higher and you feel it's a better time to buy an annuity. It depends how much income you need right now."