The first three months of 2022 saw financial markets experience some of the most challenging moments of the past two years, caused by coronavirus and war-related factors affecting the global economy.
All pension savers will have faced a very uncertain market backdrop during the opening quarter of 2022, as stock markets fell sharply in January. Bonds also declined due to the impact of the current global pandemic, change in the political climate, widespread inflationary pressures and the subsequent rising cost of goods and services, and changes to interest rates.
In fact, with global economies still adjusting to the impact coronavirus has had on supply chains and the shift in consumer spending, Russia’s invasion of Ukraine at the end of February caused global outrage and negatively affected the stock market. Indeed, whenever big shocks such as war happen, company shares (also referred to as ‘stocks’ or ‘equities’) respond almost immediately.
Another financial consequence of the war has been the significant spike in already high energy prices and general commodity prices soaring. This is due to Russia’s importance as a producer of several commodities including oil, gas and wheat, but also due to Ukraine being a key access route for delivering gas to the rest of Europe. This has contributed to a further surge in inflation as well as supply chain disruption.
Bonds have also been negatively affected by higher inflation. One way to control inflation is for central banks to increase interest rates, with the Bank of England being among those at the start of a rate hike cycle. Interest rates are directly linked to bonds, hence when interest rates rise, bonds fall in value. As a result our Pre-Annuity Plan, PensionBee’s only 100% based corporate bond fund, has been highly impacted.
This tumultuous quarter has fortunately come to a close as some major stock markets started to surge in March and are recovering from recent lows. The UK market rose by nearly 4% and the US market rose by over 5%. However, a recovery in March doesn’t mean this will continue in April as there are still lots of economic challenges that need to be resolved. China is still struggling to contain an outbreak of coronavirus in Shanghai despite the longest lockdown in two years, which is keeping most of its 25 million residents confined to their homes. And at the time of writing, Russia and Ukraine are no closer to resolving their conflict through peace talks. Both of these factors will put even more pressure on global supply chains in the months to come.
It’s always important to bear in mind that pensions are long-term investment products and they’re designed to weather short-term fluctuations. Therefore, despite this worrying unpredictability, it’s normal for the value of your pension to go up and down each day as it grows over the long term.
Remember that past performance is not a guide to future performance and this blog has solely been prepared for informational purposes and not with the intent to influence future investment decisions. As with all investments, capital is at risk.
Savers under 50
| Plan / Index | Money manager | Performance over Q1 2022 (%) | Proportion equity content (%)^ |
|---|---|---|---|
| UK stock market | N/A | 2.9% | 100% |
| US stock market | N/A | -4.6% | 100% |
| Fossil Fuel Free Plan | Legal & General | -2.8% | 100% |
| Shariah Plan | HSBC (traded via SSGA) | -4.7% | 100% |
| Tailored (Vintage 2037-2039) | BlackRock | -3.8% | 75% |
| Tailored (Vintage 2043-2045) | BlackRock | -3.8% | 88% |
| Tracker Plan | State Street Global Advisors | -4.1% | 80% |
Sources: Data is taken directly from the money managers or stock market factsheets. All performance is reported in gross figures. Past performance is not an indicator of future. performance. Capital at risk. These tables do not take account of any fees that may be levied for a particular investment. Factsheets are available here pensionbee.com/plans. Plan performance may vary slightly from published factsheets due to timing differences and other negligible methodological differences. ^Equity content refers to the amount of exposure each plan has to global stock markets and other listed risk-on assets, such as property and commodities.
Savers over 50
| Plan / Index | Money manager | Performance over Q1 2022 (%) | Proportion equity content (%)^^ |
|---|---|---|---|
| UK stock market | N/A | 2.9% | 100% |
| US stock market | N/A | -4.6% | 100% |
| 4Plus Plan | State Street Global Advisors | -2.2% | 35% |
| Tailored (Vintage 2019-2021) | BlackRock | -4.2% | 40% |
| Tailored (Vintage 2031-2033) | BlackRock | -3.8% | 63% |
| Preserve Plan | State Street Global Advisors | 0.08% | 0% |
| Pre-Annuity Plan | State Street Global Advisors | -11.5% | 0% |
Sources: Data is taken directly from the money managers or stock market factsheets. All performance is reported in gross figures. Past performance is not an indicator of future performance. Capital at risk. These tables do not take account of any fees that may be levied for a particular investment. Factsheets are available here: pensionbee.com/plans. Plan performance may vary slightly from published factsheets due to timing differences and other negligible methodological differences. ^Equity content refers to the amount of exposure each plan has to global stock markets and other listed risk-on assets, such as property and commodities.
Despite the tables above showing the UK stock market performing better than the US one, it’s important to note that the US stock market enjoyed better cumulative results over the past few decades, as illustrated by the graph below. Therefore, a well diversified plan will have exposure to many different countries and is beneficial to long-term investing.
Source: Google
An important note of caution: It’s impossible to forecast what will happen from quarter to quarter, and past performance should never be used to predict future performance.
For our customers who are already in retirement and are perhaps thinking about withdrawing all of their pension, we hope that you will take comfort in the range of plans we have on offer. You may want to consider only drawing down what you need and keeping a close eye on the markets. Our Investment Pathway guide can help you select a plan based on your personal retirement aims. We will continue to keep you regularly updated on what’s happening with your savings and if you have questions about your plan’s performance, or anything else, you’re welcome to get in touch with your BeeKeeper.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
