‘My pension has plunged £120k because of Trump's tariff war'
Has your retirement been blown off course by Trump's tariff wars? We want to hear how you're dealing with it. Email: money@telegraph.co.uk.
Donald Trump's tariffs have reset the international economic order – and caused havoc in the financial markets.
Pensions and Isas, the bedrock of most people's personal finances, are largely invested in the stock market. Millions of us will have seen our investment portfolios shrink gradually over the past week and then sharply this morning.
London-listed shares dropped 6pc before recovering slightly. The real test will come when the New York market opens this afternoon.
One Telegraph Money reader, Michael Stansfield, has watched his pension fall in value by £120,000. He will not be alone.
Financiers are now pricing in the costs of a 'global recession', with the FTSE 100 plunging this morning to a one-year low. The Dow Jones is down more than 10pc over the past month.
The hit will shave £22bn – or 0.8pc of GDP – from the UK's economy, accountancy firm KPMG warned.
The markets swings will hit savers in all sorts of ways, with pension pots hammered by the dips. Among those who should be most worried about the market fluctuation are those who are preparing to retire imminently, with experts advising patience and diversification.
Those close to retirement typically value stability over risk – a pension pot suddenly dropping by 20pc six months before finishing work would be a nightmare scenario.
Mr Stansfield, whose pension fell by more than £120,000 since the start of the tariff wars, is 49 and plans to retire within a decade. He said he would be worried if he was approaching retirement in the next few months, but he is confident he can ride out the market turmoil.
He said: 'When we have such big falls in the stock market it is unnerving, but we have all been here before. Every time the market comes back, and I don't see anything different this time around.'
Mr Stansfield added: 'If I was to retire in the next few months, I might be feeling a twinge. But what this teaches us is that in the five years' run-up to retirement, you've got to start to think about converting the equites into some bonds or cash so that you can ride out any major drops in equity prices.
'I'm 50 this year, so young enough to ride this one out again, but my plan is to retire somewhere between 57 and 60. After the next recovery, I will start to look to put some money into bonds around the age of 54 or 55.'
Another Telegraph Money reader, aged 66, said his pension pot had dropped by 12pc over the weekend. In response, the pensioner has moved some of his investments into Isas.
He was pessimistic about the chance of quick improvements, and said: 'My own view is that this is not a short term 'blip' but a herald of a longer term depression. Who knows whether Trump will backtrack on the tariffs?
'But the damage in confidence has already been made and the changes to the economic order are likely profound and unprecedented.'
The pensioner said that he had a small workplace pension on top of his state pension, and that he has chosen to use Isas to invest rather than a self-invested personal pension (Sipp).
He said: 'As a retiree, I invest mainly for income and as long as my dividend income is relatively unscathed it matters not to me how my equities are valued.
'Having said that, few investors can avoid the consequences of a global recession unless one is skilled in the use of derivatives and I am not one of them.'
Pension experts said that the market movements proved the value of having a diversified portfolio, and added that, for most, there was no need to make panicked decisions in the immediate future.
Sir Steve Webb, a former pensions minister and partner at LCP, said: 'The current turbulence in markets is a reminder of the value of diversification when it comes to investing.
'Whilst focusing on a limited number of assets in a limited number of markets, such as US tech stocks, would have served people well in recent years, recent events are a reminder that there is no such thing as a one-way bet in investing.'
Tom Selby, of provider AJ Bell, said: 'For those planning to buy an annuity, the aim of the game is usually de-risking by shifting towards bond investments that act as a hedge against annuity rates.
'If you stay exposed to stock markets, you'll also be exposed to volatility, such as we've seen recently as a result of the Trump tariffs, which could blow your retirement plans off course.'
He added: 'For those planning to stay invested for the long-term through drawdown, provided you are comfortable with the risks you are taking and your overall long-term strategy, there should be no need to make panicked decisions based on day-to-day events, the outcome of which remains highly uncertain.'
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