2021 was another challenging year for the global economy. Markets have had to digest rising inflation, which raises the cost of borrowing and causes money to become more scarce. For consumers, inflation erodes the value of cash and causes the steady rise of prices for everyday goods and services. This in turn slows growth in the stock market.
According to the Office for National Statistics, the annual rate of consumer price index (inflation) rose to 5.4% in December 2021. This is the largest 12-month gain since March 1992, when it stood at 7.1%. This rise has been attributed to several factors; including the economy still struggling with the effects of Covid-19, supply chain disruptions and labour shortages. Throughout 2021, central banks around the world kept interest rates close to zero to help control the economic shock of Covid-19.
Covid-19 continued to drive market direction and narrative this year. New variants have extended the duration of the pandemic and delayed a return to normal. The equity market (shares) sustained a surge in volatility in late November due to the emergence of the highly infectious Omicron variant and the rise in hospitalisations in several countries. Despite concerns about Omicron, global equities were stronger in the final quarter of 2021. December saw a number of economically sensitive areas of the market recover from the sharp losses they experienced at the end of November.
Over 2021 the UK stock market gained 18%, its best performance since 2016, whilst the US stock market performed at 29%. In early December, just five stocks - Microsoft (MSFT), Google (GOOG), Apple (AAPL), Nvidia (NVDA) and Tesla (TSLA) - accounted for 51% of the US stock market’s return since April.
2022 update: Following the market highs of 2021 year end, we’ve seen 2022 get off to a rocky start. Our latest blog post explains more about market turbulence, how this will be impacting your pension balance and why it’s important to remember that short term fluctuations are normal and expected.
What happened at PensionBee?
Over this challenging year for the economy, our plans performed well. Plans designed for savers under 50 have a higher level of investment in global markets compared to plans for older savers. These plans have all benefited from stock market gains and have grown between 16% and 28% over 2021. Our two responsible funds, the Fossil Fuel Free and Shariah plans have performed the best, having grown by 23% and 28% respectively, outperforming the UK stock market. Most plans for those aged 50 and over have also recorded growth and continue to preserve savings for those who are close to retirement through relatively low exposure to company shares, or none at all.
It’s good to remember that pensions are designed to be long-term investments and to consider that when looking at short-term performance. Dips and rises over time are to be expected. PensionBee is proud to offer long-term financial products in partnership with the world’s largest money managers: BlackRock, State Street Global Advisors, HSBC, and Legal & General.
As announced in October 2021, we completed the closure of the Match and Future World plans in December, in order to simplify our product range. Savers in the Match Plan were transitioned to our Tailored Plan, also managed by BlackRock. Savers in the Future World Plan were transitioned to our Fossil Fuel Free Plan, also managed by Legal & General.
Throughout 2021, we worked with our asset managers to increase screens on our Tailored Plan, to ensure that your money can’t be invested in companies that repeatedly violate the UN Global Compact, or in companies that produce controversial weapons, as well as companies that sell tobacco, civilian firearms and tar sands / coal.
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 2021 (%) | Proportion equity content (%)^ |
|---|---|---|---|
| UK stock market | N/A | 18% | 100% |
| US stock market | N/A | 29% | 100% |
| Fossil Fuel Free Plan | Legal & General | 23% | 100% |
| Shariah Plan | HSBC (traded via SSGA) | 28% | 100% |
| Tailored (Vintage 2037-2039) | BlackRock | 16% | 75% |
| Tailored (Vintage 2043-2045) | BlackRock | 19% | 88% |
| Tracker Plan | State Street Global Advisors | 16% | 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.
Savers over 50
| Plan / Index | Money manager | Performance over 2021 (%) | Proportion equity content (%)^^ |
|---|---|---|---|
| UK stock market | N/A | 18% | 100% |
| US stock market | N/A | 29% | 100% |
| 4Plus Plan | State Street Global Advisors | 12% | 35% |
| Tailored (Vintage 2019-2021) | BlackRock | 7% | 37% |
| Tailored (Vintage 2031-2033) | BlackRock | 13% | 61% |
| Preserve Plan | State Street Global Advisors | 0% | 0% |
| Pre-Annuity Plan | State Street Global Advisors | -6% | 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.
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 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 Pathways 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.
