Market update

A watering can

23 March 2020

The global financial markets are still very volatile as cases of coronavirus rise across the world, and we expect this market uncertainty to continue in the short term. 

In an emergency move, we’ve seen the Bank of England cut interest rates again as it tries to support the UK economy in the face of the coronavirus pandemic. Interest rates are now down to 0.1% from 0.25%- the lowest ever in the Bank’s 325-year history.

The move coincided with the £350bn package of loans and grants announced by Chancellor Rishi Sunak to help Britain cope with the lockdown of large parts of the economy. In response to the mass closure of schools as well as retail outlets, restaurants and bars across the UK, the Chancellor also offered to pay 80% of wages for employees unable to work if their employer cannot afford to, which will have come as a relief for many.

As the uncertain situation continues to unfold, you can feel assured that our investment experts are continuously monitoring the markets, keeping a close eye on your pension investments and making any changes we feel necessary in response to market events.

It’s very likely that you’ll have seen the value of your pension drop recently, and we’d expect it to continue to go up and down over the coming weeks.

It’s important to remember that pensions are long term investments. It’s very normal for the value of investments to go up and down. Although not guaranteed, the hope and expectation is that values generally go up over the longer term, despite this short term volatility.

Making decisions based on what’s happening in the short term can be a risky thing to do. It might be tempting for example to move investments into cash for a while – but in doing that, you might miss out on the point when the value goes back up - so you could lose out in the long term.

If you’re thinking about switching investments, or if you’re taking money out of your pension, we strongly recommend that you speak to your financial adviser to consider your options thoroughly before taking any action.

Investing with us

Our key goal is to deliver good outcomes for our customers. We do this by following our core beliefs:

Pensions are long term investments

While it can be hard to watch large market drops, especially if the value of your savings is falling, it’s important to remember that investing for retirement is a long term game. It’s very normal for an economy to go through phases of expansion and contraction.

In fact, over the long run there is a recession every five to ten years. We think of these cycles in terms of waves of growth and inflation, and consider which investments do best when growth is strong or weak, and when inflation is falling or rising. Our investment experts analyse and understand where we are in that cycle and which types of investments we should be investing in within the portfolio mix. This is called the short term view and we do this on a day to day basis so that we can try to maximise returns and avoid some of the losses.

Falling markets can be buying opportunities, particularly when you are planning to invest for a long time period. We see the current market falls as potential buying opportunities for equities. The multi asset portfolios are currently holding slightly more equities than average, having bought on the recent dips. We’re also holding more corporate and high yield bonds.

Greater diversification

We believe that investing in a wide range of asset classes will result in more consistent performance across a wide range of economic conditions. This spread of different investments helps to reduce the risk of having all your eggs in one basket.

The Governed Portfolios are designed for investors who are saving into a pension and aim to maximise returns above inflation within a defined risk framework and term to retirement.

The Governed Retirement Income Portfolios (GRIPs) are designed for customers who are taking money out of their pension on a regular basis and aim to maximise returns above inflation to support sustainable, regular income withdrawals for a range of risk profiles. The portfolios hold a wide range of investments, including company shares, property, bonds, commodities and cash in order to help them meet their objectives.

Governance

We believe that all investment options should be monitored on a regular basis, and this is a core part of what we do for our customers. All the portfolios are monitored on an ongoing basis by our experts to ensure they deliver in line with their objectives. You can keep an eye on how your investments are performing using our online service.

If you are in any doubt about the suitability of any particular type of investment, you should seek professional financial advice. Advisers may charge for providing such advice and should confirm any costs beforehand.

For more information please speak to your financial adviser.

Read our previous market updates