This is part of our quarterly plan performance series. Catch up on last quarter’s summary here: How PensionBee’s plans are performing in 2022 (as at Q2).
Investments have dropped significantly in 2022, and while this past quarter started on a more positive note, investor sentiment was a continuation of what we witnessed in the first two quarters of this year. Across the UK, pension balances are still volatile and many savers have experienced substantial falls over the last months. Many savers nearing retirement will have been impacted by falling share and bond prices.
Stock markets have been reacting to an unfolding story of three economic shocks: the war in Ukraine, the UK’s rising inflation rate, and China’s supply chain disruptions.
This year market volatility has veered into bear market territory, where markets are in significant decline for a few months, at least. As investors, it’s concerning, but this period is never permanent. In fact, global markets have recovered from every bear market in history. Even the biggest market crash since the Great Depression, the 2008 global financial crisis, was followed by the longest period of sustained growth in market history until the coronavirus pandemic struck markets in 2020.
Whilst we experience this volatility, please be reminded that bear markets are a typical feature of the capital markets cycle and are eventually always followed by a bull market, a period of sustained growth. Undoubtedly, stock markets will need more time to fully recover from the scale of volatility in global stock markets that have characterised 2022 to the present date.
After months of investments tumbling in a downward trend, July saw marginal growth as markets appeared to stabilise after six deeply unsteady months. In fact, China was the only leading stock market to fall in value. This brief rebound had given investors optimism for further stability and perhaps even growth. However, August reminded us all that we’re still firmly in the grips of a bear market.
In fact, September saw the continuation of the domino effect created by the international energy crisis and the ongoing war in Ukraine. Uncertainty over measures taken by central banks to combat inflation (rising interest rate), along with the energy crisis, has clouded any optimism for an imminent recovery. September saw the Pound Sterling fall by almost 5% against the Euro and by nearly 8% against the US Dollar. This reflects the UK’s weaker economic outlook, as inflation is at 10.1% at the time of writing. In reaction to the rise in inflation, the Bank of England raised interest rates to 3%.
Rising interest rates profoundly impacted fixed income markets, especially bonds. Historically, bonds have been seen as ‘safe assets’, as they thrive on market stability and aim to provide moderate growth for investors, however, bonds and bond-heavy investments have suffered dramatic losses this year.
2021 and 2022 have been the worst years for bonds since 1842 due to inflation, which bonds are ‘allergic’ to. This is because the existing interest rates on bonds currently in the market become much less competitive relative to newer bonds coming onto the market, as the newer bonds are expected to have higher interest rates. Consequently, the prices of the current bonds in the market fall, which is what has now occurred. As a result our Pre-Annuity Plan, like all 100% bond plans, has been impacted.
Pensions are designed to be long-term investments and have historically weathered all short-term financial storms that have been thrown at them. In fact, as you can see from the tables below, PensionBee’s plans performed better than the US and UK main markets this year.
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 2022 (%) | Proportion equity content (%)^ |
|---|---|---|---|
| UK stock market | N/A | -27% | 100% |
| US stock market | N/A | -25% | 100% |
| Fossil Fuel Free Plan | Legal & General | -10% | 100% |
| Shariah Plan | HSBC (traded via SSGA) | -14% | 100% |
| Tailored (Vintage 2037-2039) Plan | BlackRock | -18% | 73% |
| Tailored (Vintage 2055-2057) Plan | BlackRock | -16% | 95% |
| Tracker Plan | State Street Global Advisors | -19% | 80% |
Sources: Data is taken directly from the money managers or stock market factsheets. Performance is reported gross of fees (based on unit price) and net of irrecoverable withholding tax. 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: /uk/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.
Savers over 50
| Plan / Index | Money manager | Performance over 2022 (%) | Proportion equity content (%)^^ |
|---|---|---|---|
| UK stock market | N/A | -27% | 100% |
| US stock market | N/A | -25% | 100% |
| 4Plus Plan | State Street Global Advisors | -9% | 25% |
| Tailored (Vintage 2019-2021 / Flexi) Plan | BlackRock | -19% | 36% |
| Tailored (Vintage 2031-2033) Plan | BlackRock | -19% | 61% |
| Preserve Plan | State Street Global Advisors | +1% | 0% |
| Pre-Annuity Plan | State Street Global Advisors | -37% | 0% |
Sources: Data is taken directly from the money managers or stock market factsheets. Performance is reported gross of fees (based on unit price) and net of irrecoverable withholding tax. 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: /uk/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.
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, 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’ll continue to keep you regularly updated on what’s happening with your savings and if you have questions about your plan’s performance, this blog, or anything else, you’re welcome to get in touch with our Engagement Team or your BeeKeeper.
This is part of our quarterly plan performance series. Check out the next quarter’s summary here: How PensionBee’s plans are performing in 2022 (as at Q4).
Have a question? Get in touch!
You can check out our Plans page to learn how your money is invested in different assets and locations. You can always send comments and questions to our team via engagement@pensionbee.com.
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.
