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Stock market volatility to hit pensions

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Nearly one in three IFAs expects clients to be saving less into their pensions this year as the stock market volatility and the credit crunch hit home, research from MetLife MetLife shows.

The nationwide poll of advisers found 29% expect a drop in pension investment by existing clients in 2008 as savers are deterred by a combination of stock market volatility and the need to divert spare money to cover the increased cost of living.

The research also shows the average predicted reduction in pension investment is a substantial 21%. MetLife analysis shows that the FTSE-100 has lost around 7.6% since the start of 2008 and at one stage in mid-March was more than 16% lower than its 2008 starting level of 6,456.9.

Dominic Grinstead, strategic development and marketing director at MetLife, said: “Stock market volatility has been one of the biggest concerns in the past year with the impact of the credit crunch beginning in 2007 adding to the pressure on people’s finances.

“It is worrying that nearly one in three IFAs is expecting a drop in pension investment by existing clients this year and the predicted reductions are significant.

“Market volatility looks set to continue throughout 2008 and this appears to be making some pension savers reconsider their decision to invest. However if they reduce investment in pensions because of stock market volatility they will see retirement income fall.

“Guarantees provide an excellent compromise for pension investors offering exposure to equities, which usually provide the best returns in the long term, and offering the safety net that investors look for in other asset classes such as bonds. By consulting with their financial advisers, investors can balance their appetite for risk with the potential for high long-term growth.”

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