UK - There's no hiding the fact that pension holders will be hit hard following this week's stock market dives, says Merrill Lynch.
According to Ian Stewart, the firm’s chief economist for the UK: [Stock market slumps] will squeeze on employers who offer defined benefit schemes, although private pensions will be hit hardest.
“There are a series of concerns and negative sentiments over financial markets and, with the risk of terrorist attacks in the US, things look set to get worse before they get better.
Some £70bn has reportedly been wiped off the value of shares already this week, with investors already spooked by revelations of fraudulent accounting in corporate America.
But industry bodies have rallied round yet again urging investors not to panic.
The National Association of Pension Funds (NAPF) and the Association of British Insurers (ABI) said people should maintain their contributions, particularly in occupational schemes, and remember that pensions are a long-term investment.
Overall Merrill Lynch remains positive on the UK, predicting solid growth ahead, and maintaining an above-consensus 2.2% GDP forecast.
“But a policy of more gradual monetary tightening is not without risks,” added Stewart.
“Foremost among them is that the ‘bubble’ in asset prices shifts from equities to the housing market.”
By Madhu Kalia
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