"I've Lost £50,000 in Two Weeks"

Private investor Graham Smith is worried about his health and wealth as a result of the coronavirus

Emma Simon 18 March, 2020 | 10:45AM
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Graham Smith, 62, was hoping to retire within the next three years but his plans will have to be reviewed in light of the economic turmoil caused by coronavirus. Graham, who now works part time for a start-up tech company, says the stock market falls have had a “severe” effect on his pension.

He says: “I have been trying not to look at what it’s now worth, but last time I checked around £50,000 has been wiped off its value.” This pension, with a former employer, is a defined contribution scheme, which means the value of the pot is not guaranteed but is determined by contribution levels and the performance of the underlying funds.

Graham, who lives in London with his wife and two sons, says: “I left this company four years ago and I think the current value of the fund is around the same as when I left, so that’s four years of growth wiped out in less than two weeks. I’m aware that you have to expect volatility with any stock market investment, but this certainly seems to be one of the most extreme events I’ve seen.”

Graham is particularly concerned because, now he has left that employer, he can no longer add further contributions to the pension to help bolster its value. “I could buy units at a lower price now, which might mitigate some of these falls when markets start to turn again,” he says.

The upshot of the latest bout of volatility is that Graham, and many others in his situation, may end up working for longer than planned.

How Have Bonds Performed?

This pension fund is split across a range of BlackRock tracker funds including holdings in BlackRock ACS Continental Europe Equity Tracker, BlackRock ACS UK Equity Tracker and BlackRock ACS Japan Equity Index. He also holds a fund investing in five-year index linked gilts and another in 15-year fixed interest securities.

Graham says: “I don’t know whether the investments in gilts and fixed interest have performed better in the current turbulence. I tried to look at valuations via the pension’s online app, but the data for individual funds seems to only show the performance up to the end of January.”

He acknowledges, however, that with the stock market moving so wildly each day, it is difficult to anticipate how various assets will perform. A £330 billion monetary stimulus package from the government could affect the bond market too. “I guess, like most people, I will have to just wait and see,” says Graham, who adds that the health of friends and family and trying to get food from the supermarket are bigger concerns at the moment.

Graham also has a defined benefit, or final salary, workplace pension, so is not wholly reliant on this pension fund. This pot will pay out a fixed sum for the rest of his life, while he hasn’t taken this up yet while he has still been working. He may now end up accessing this pot sooner than expected, however, and is concerned that the current crisis could cause problems for big pension schemes such as this. “I am going to do some research about whether I would have more protection if I am taking this income, should the scheme go bust,” he says.

Graham also has a couple of Isas, but these are small compared to his pensions, which he has prioritised because of the employer contributions and generous tax relief. The money in his stocks and shares Isa is split between the M&G Recovery and Bronze-Rated Liontrust Smaller Companies funds, and he also has a cash account. He adds: “Ironically, I had been thinking for the past year or so that I should shift the cash one, as the returns are next to nothing, but I’m quite glad I never got around to doing it. It’s a little rainy-day fund should we need it now!”

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk