You may think that global stock market turmoil has little impact on your personal finances, but it could have more of an effect than initially expected, particularly if you're saving into a pension fund. In fact, new research by Investment Life & Pensions Moneyfacts has revealed that the average pension fund fell by 2.5% in January 2016, its worst performance in the opening month of the year since 2009.
The year so far has clearly been a testing time for pension funds, which is reflected by the fact that just 17% of the 5,921 pension funds analysed posted positive growth in January, with some funds falling by as much as 20%. The last time pension fund performance made a worse start to the year was back in January 2009, when the average pension fund fell by 3.5%.
However, the good news for pension investors is that there is no correlation between pension fund returns recorded during the opening month of the year and their subsequent growth over the remainder of the calendar year. As the table below shows, after having fallen by 3.5% in January 2009, the average pension fund posted impressive growth of 22.3% for the full calendar year. By contrast, pension funds got off to a flying start performance-wise in 2015, but finished the year up by just 2.6%.
"There is no doubt that pension fund performance has disappointed so far this year, with the considerable uncertainty around the global economy hampering returns," said Richard Eagling, head of Pensions and Investments at Moneyfacts. "However, our research shows that a slow start to the year does not necessarily set the course for disappointing pension fund performance for the remainder of the year."
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