Investments and pensions: what can you do in the face of financial turmoil in the UK? | Silver


JLast week’s financial crisis caused by the mini-budget hit the pensions, Isas and investments of millions of ordinary British households. What impact has this had on your money, and if so, what can you do about it?

The blow to Isas and the actions

Some individual stocks have really cratered over the past year, and many have plunged further after the budget. Ocado, the online grocery store, is down 71% over the year. Persimmon, the homebuilder, is down 55%, M&S down 49%. However, BP is up 28% and Shell 36%.

Bad luck if you put your Isa money in a bond fund. They are sold as conservative and safe investments. But those invested in UK gilts – bonds issued by the UK government – ​​fell around 12% in just two days after the Kwasi Kwarteng mini-budget, and have not recovered since.

The FTSE 250 index, made up of mid-sized companies (retailers, homebuilders, etc.) has done significantly worse than the FTSE 100. It has fallen 8% since the budget and is down almost 30 % since its peak in September. Last year.

The most popular fund in the UK for retail investors is Fundsmith Equity, which manages around £24 billion. Investors have lost about 1% in the past two weeks, and if you invested a year ago, you’ve lost 9%. But it’s still up 72% over the past five years. Few will want to bail out.

Many stocks plunged after the mini-budget. Photograph: Simon Dawson/Reuters

What this means for your pension

Normally, pension funds are more stable than the equity (stock) market, as they have a mix of stocks, bonds and assets. But with bonds doing so badly, they have also been affected. For example, Legal & General’s standard pension fund invested on behalf of many UK employers has lost around a tenth of its value in the past six months.

You don’t have to worry if you have an end-of-career salary type pension, where what you receive is tied to what you earn. But they are mostly limited to the public sector now.

The good news

Yes there is. The proportion of your pension fund invested in UK stocks and bonds is much lower than it was a generation ago. Microsoft, Apple, Nestlé and Samsung are likely to feature more in your pension than most UK companies.

Wall Street also fell, but as the dollar has so far risen against the pound, the impact for us has been minimal. As Jason Hollands of Bestinvest points out, in sterling, the S&P 500 index of US giants is down only around 3.8% year-to-date.

Britain’s big FTSE 100 companies – such as BP and Shell – make most of their money outside Britain. They report their profits in dollars, which can translate into a bargain in sterling.

what you can do now

Doing nothing is not a bad option. At the end of February 2020, when the coronavirus pandemic hit, the FTSE 100 fell from 7,450 to 5,190 within days, a loss of 30%. But by January 2021 it was back above 7,400. If you’re young, you should be able to survive the slingshots and arrows of outrageous fortune in the longer-term markets.

The mantra of the UK’s most successful fund manager, Terry Smith of Fundsmith, is: “Buy good companies, don’t overpay, do nothing”.

Put more into your retirement

It’s almost always a sensible thing to do if you have some spare cash, as you get a 20-40% tax break. Your contributions today will allow you to buy shares at a much lower price than a year ago. Find out from your company if it has an additional voluntary contribution plan.

A United Kingdom five pound, ten pound, twenty pound and fifty pound with one pound coins
Do you have cash to put in your pension? Photograph: Dominic Lipinski/PA

Turn it into money

Most company pension plans allow employees to split their money between bonds, stocks and cash. If you really believe we’re headed for Armageddon, you could spend a lot of money, but you’ll be lucky to get more than 0.5% interest in your pension, and if the market goes up, you will lose massively.

buy gold

Usually a safe haven in stormy times, gold is actually down. In dollars, it is currently at $1,651 an ounce, down almost 20% since March of this year. But in sterling it’s around £1,505 an ounce, roughly flat over the same period. This tells you how much the pound has fallen rather than how gold is viewed in global markets.

A pile of gold bars
Have you thought about gold? Photography: Petr Josek Snr/Reuters

What if I want to make money fast?

The FTSE 250 index is cheap by recent standards if you’re inclined to take a punt. In Europe, Spain’s Ibex 35 index of its largest companies also fell – down around 30% from 2018.

Many US tech stocks are down massively: Netflix and Facebook are down around 60% this year, while Amazon and Google are down around 25-30%. You’ll laugh if they rebound, but not if the pound rebounds as well, wiping out much of your gain.

How to invest

Want to buy stocks or funds online? Read this guide from The Guardian.

Prices and figures correct at time of Thursday 29 September writing.


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