Investing during uncertain times

You might be feeling nervous about your finances in these uncertain times

With turmoil in the financial markets because of the Covid-19 pandemic, there’s a lot in the news about large market falls affecting the stock market.

How has Covid-19 affected stock markets? 

Financial markets don’t like bad news. And the current Covid-19 pandemic is unfortunately no exception to that rule. So, you’ll no doubt be aware of the impact this is having on stock markets at the moment. And although downturns are not unusual, they can be very unsettling.

We can’t say how long this downturn will last, or how bad it will get, but it is interesting to look at what’s happened before.

Since 1980 there have been many declines of 20% and more, lasting at least two months. The SARS outbreak in February 2003, Avian flu in 2006, the new strain of Swine flu in 2009, Ebola outbreaks of 2014 and 2018, and the Zika virus in 2016 all caused significant stock market turbulence.

Global stock markets weathered all of these and markets did recover over time. But, of course, what happened in the past isn’t always a guide to what might happen in the future.

Should I do anything?

It’s a very natural reaction to feel concerned when you see the value of your investments fall. Or perhaps to think that you need to do something. Many financial experts will say it’s best to sit tight during times of market uncertainty-particularly when you are investing for the long term. But only an adviser can let you know what’s the right thing for you to do.

It’s important to remember that Investing is for the long term. And not to take a short term view. Remember, if the value has fallen it’s only a potential loss. It’s only once you decide to cash in your investment, that it actually becomes a loss.

If you’re worried or thinking of making changes to your investment, we strongly recommend you speak to your financial adviser.

Why has my fund value dropped?

Depending on where your plan is invested (stock markets, property, bonds, for example) you might have seen your fund value go down.

The uncertainty surrounding our economy has led to significant falls in stock markets, which can impact the value of pensions and investments linked to these markets.

The extent of any drop will depend on how your fund is invested. We’ve seen reports of falls of up to 30% or more in stock markets. But, if your money is spread across a number of different investment types (for example if you’re invested in PruFund or our With-Profits fund), you might be more protected from the full extent of this.

With any investment, there is always the chance they can go down, as well as up, in value. And there’s no certainty that you’ll get back the amount you put in.

What are your investment experts doing?

The Investment strategists at Prudential are continually monitoring the markets to ensure we are best placed to protect and grow our customers’ investments over the longer term. In times like these, they focus on valuations, our proven investment process, and look to buy more assets at attractive prices at the appropriate risk for Prudential customers. They do not panic.

Here’s some frequently asked questions about the impact of Covid-19 for our customers

You’ll find information on some of the most common questions our customers are asking about the current situation and how it affects their investments.

These include:

The With-Profits Fund aims to smooth some of the extreme highs and lows of short-term investment performance to provide a more stable return. We achieve this by holding back some of the investment returns in good years with the aim of using this to support bonus rates* in the years when investment returns are lower.

This offers some protection against bad market conditions. However, bear in mind that smoothing will not stop the value of your plan reducing if investment returns have been low.

You also benefit from a fund which invests in a broad range of investment types. This means you don’t have all your eggs in one basket and may not suffer from the full impact of stock market falls

If you’d like more information on our With-Profits Funds, please go to pru.co.uk/investments/investment-fund-range/with-profits

*Annual/Regular and Final Bonuses are the way you receive your share of the profits of the Fund. Different types of plan receive different bonus rates. Note that bonus rates aren’t guaranteed.

You can find more detailed, technical information about how we manage our Funds in our Principles and Practices of Financial Management (PPFM) document, which is available on our website: pru.co.uk/ppfm. You will also find customer friendly versions particular to your plan type.

The PruFund range of funds aim to grow your money over the medium to long term (5 to 10 years or more), while protecting you from some of the short-term ups and downs of direct stockmarket investments by using an established smoothing process. 

Like most stockmarket-based investments, the value of the underlying funds changes daily, sometimes increasing and sometimes decreasing. We aim to reduce the impact of these movements over the short term by using a smoothing process.

This means that while you won’t benefit from the full upside of any potential stockmarket rises you won’t suffer from the full effects of any downfalls either.

You also benefit from a fund which invests in a broad range of investment types. This means you don’t have all your eggs in one basket and may not suffer from the full impact of stock market falls.

If you’d like more information on our PruFund Funds, please go to pru.co.uk/investments/investment-fund-range/pru-fund

You can find more detailed, technical information about how we manage our Funds in our Principles and Practices of Financial Management (PPFM) document, which is available on our website: pru.co.uk/ppfm. You will also find customer friendly versions particular to your plan type.

We want to reassure you that we are managing your savings in our usual expert way and that we are continuing to make annuity payments as normal. There is no need to worry or take any action.

Depending on your product, you might be able to switch the funds your money is currently invested in.

It’s important you think about your long-term needs and circumstances. Before you decide you’d like to switch your investment, we recommend you speak to a financial adviser who’ll be able to explain all of your options to you.

If you don’t already have an adviser, go to pru.co.uk/find-an-adviser where you’ll be able to find an adviser local to you.

For more information on switching please refer to your Key Features Document you would have received when you started your plan.

Like many other types of investments, you may have seen a reduction in the value of your drawdown plan.

If you are currently taking an income this means your money may not last as long as you previously expected. We know everyone has different circumstances at the moment. However, it may make sense, if you can, to consider reducing the amount you’re withdrawing to give your plan the chance to last longer.

You can use this Retirement Income Planner to give you an idea of how any changes to your income will affect how long your money might last.

We would recommend you speak to your financial adviser, if you have questions about your investment or if you’re considering changing anything. If you don’t have an adviser visit pru.co.uk/find-an-adviser to find one.

If you’d like to view the value of your pensions and investments with us, with most plans you can do so by logging in to our Online Services. Values are normally updated every working day.

The uncertainty surrounding our economy has led to significant falls in the stock market, which can impact the value of endowments linked to these markets.

With any investment, there is always the chance they can go down as well as up in value. And, there’s no certainty that you’ll get back the amount you put in.

If this policy is your only means of paying off your mortgage, we would recommend that as a first step you contact your mortgage lender as soon as possible to let them know that your endowment policy may mature with a lower value than expected.

We understand you may be worried, we recommend you speak to a financial adviser. If you don’t already have an adviser, go to pru.co.uk/find-an-adviser where you’ll be able to find an adviser local to you.

Scammers are taking advantage of the Covid-19 situation. The effect of the coronavirus pandemic on markets and personal finances is making people more susceptible to financial scams. Criminals see opportunity in the ongoing pandemic, when people are feeling confused and vulnerable. It’s important to be on the lookout for scams to ensure you don’t become a victim. 

  • Beware of calls, texts, WhatsApp messages or emails from businesses and individuals offering great deals. Watch out for things like a free pension review, unsolicited messages on how to unlock cash from your pension, fantastic investment opportunities with ‘guaranteed returns’ or requests for you to move money into another account.
  • High pressure sales tactics are another tip off to a scam. Look out for any business or individual who is rushing you to agree to a deal or sign anything.
  • We have also seen ‘Good cause’ scams where scammers ask you to invest in good causes such as face masks and hand sanitiser often promising lucrative returns.
  • Watch out if you are asked for upfront fees. Take as much time as you need to avoid making rash decisions that you may regret.

  • Never give out your password, don’t click on links on emails from unknown senders, look out for typos, errors in grammar or punctuation and unexpected attachments.

  • On our dedicated scams hub you’ll find tips to protect yourself from investment scams, as well as the latest scams we’re aware of, using the Prudential name.

You should always get financial advice before making financial decisions. Scammers are very sophisticated and even the most well-informed people are at risk.

The FCA ScamSmart website offers helpful support on what you can do to spot investment fraud.

There are two types of workplace pension – the Defined Contribution (DC) pension and the Defined Benefit (DB) pension which is also sometimes called the Final Salary pension. If your employer goes out of business, each of these pensions provide a different type of protection.

Defined Contribution (DC) Pension

If you hold a DC pension, your fund is held by a pension provider – it’s not held by your employer. So, the pension provider is responsible for paying your pension. As long as your pension provider is regulated by the Financial Services Authority, you’re protected through the Financial Services Compensation Scheme (FSCS). You can find out about the protection provided for your pension at FSCS.

Defined Benefit (DB) Pension

With a DB pension, your employer guarantees you a set level of income in retirement. The amount of income you receive is based on the time you’ve been in the scheme and either your final salary or your average earnings. It’s therefore the responsibility of your employer to ensure that there’s enough money to pay your pension when you retire.

If you’re in a DB scheme and your employer goes out of business, the Pension Protection Fund (PPF) offers some relief. Set up by the government more than a decade ago, the Fund takes over the pension schemes of insolvent companies. You can learn more and see the eligibility criteria at Pension Protection Fund.

Your state pension is unaffected by fluctuations to the stock market, so you will not see any change to your benefit. Find out more about the state pension at gov.uk

Our Online Services

During these times you might prefer to use our Online Services. You can use these to check the value of your policy and get other information about your plan.

It’s important to get financial advice

It’s more important than ever to get financial advice. If you’re worried, or thinking of making changes to your pensions or investments, we recommend you speak to your financial adviser.

If you don't have an adviser, you can find one below:

Prudential Financial Planning

We have a team of advisers across the UK. You can talk to us by video call, giving you a flexible, safe and convienient way to meet whenever you want. Or if you'd prefer, we can simply chat over the phone – whatever suits you best.

We offer a restricted advice service.

Book an appointment

Unbiased

For independent advice you can visit Unbiased who can help you find an adviser in your local area. Many advisers will be able to meet you through a video meeting or a call, during these times. 

 

Visit Unbiased