Data released by specialist insurer Pension Corporation shows the recent market slide has wiped out £250 billion in pension savings. However, pensions experts advice investors to stay put and capitalise on the volatility of the equity market.
Pension funds have lost value, agreed John Lawson, head of pensions at Standard Life, but questioned the £250 billion figure put out by the specialist.
“The stock market is down 15 per cent. I would have thought that across the UK 60 per cent of assets are invested in equities which is around £1.08 trillion – a 15 per cent fall in equities would wipe off around £150 billion,” said Mr. Lawson.
The 15 per cent drop in equities is however, dependent on investors’ perception, said Mr. Lawson. Unless somebody decides to exit his equity investment today, the drop will not be 15 per cent in the long-term.
“Therefore if you are not selling today, it doesn’t matter. Values go up and down and investors with a long-term view accept that. What’s important is the price you buy and the price you sell and not in between,” he explained.
The market volatility also opens up investment opportunities, he observed. “Gilts could offset some of the £150 billion fall as 20 per cent of assets are in gilts which would be £360 billion. That has made some gains and that could mitigate the fall in equities,” he added.
“Fixed interest has gone up as people have gone into government bonds. It’s an opportunity as things are at a 15 per cent discount compared to last month. Now is a good time to buy,” observed Mr. Lawson.
“People often sell at the bottom of the market and that is the wrong thing to do. It’s an opportunity not a threat,” he said urging people to acquire fundamentally strong equities.
A section of investors are active in the market and are picking up equities of good companies, said Billy Mackay, marketing director at AJ Bell.
“In recent weeks, we have found that dealing activity was up and there are as many buys as sells going on in the market,” he observed.