MILLIONS of workers saw their pension pots plunge in value yesterday as £52billion was wiped off shares.
Markets slumped to a four-year low as the FTSE 100 index fell by more than 200 points, sparking a global panic as oil prices continue to slide.
The stockmarket has now seen about £160billion wiped off the value of blue-chip shares in the first three weeks of the year. The drop means the values of workers’ pensions will also plummet.
However, new rules allow those over 55 to draw on their funds straight away. Yesterday Work and Pensions Minister Ros Altmann admitted that times were difficult but called on investors to remain calm.
Baroness Altmann said: “It is important that people understand pensions are a long-term investment and markets will move up and down over time.
“These are of course difficult times but having a diversified investment portfolio can help achieve good longer term returns. It is not possible to predict daily markets and they should be judged over the long term.”
Savers have been dealt a double blow this week after it also emerged that about half a million people may still have to pay exit fees if they decide to cash in their pension pots, despite Chancellor George Osborne’s pledge to outlaw the unfair charges.
Earlier this week, Mr Osborne announced moves to prevent excessive exit fees, with the final decision on the maximum amount to be left to independent watchdog the Financial Conduct Authority. It is believed some 500,000 pension holders will be stung by a fee.
The continuing heavy falls in the markets will add to the woes of anxious investors.
Michael Hewson, chief market analyst at CMC Markets, said: “Few stocks were spared as European equity markets plunged sharply, with the FTSE 100 hitting levels last seen in November 2012 and tipping into bear market territory.
“Since the beginning of this year equity markets have not only spun their wheels, they have lost any semblance of positive traction as continued concerns of oversupply in the oil and gas markets set against a backdrop of slowing global growth have seen stock markets across the globe slip back into bear market territory.”
Analysts warned that the falls may not yet be at an end, with investors increasingly jittery.
Laura Lambie, of Investec Wealth Investment, said: “Investors have decided the world is a riskier place. There’s been a short-term change in sentiment.”
The FTSE 100 index initially fell three per cent, or 175.2 points, to 5699.5 as the price of Brent Crude dipped below $27.50 a barrel in early trading. But, after a brief rally, the FTSE ended the day even lower, closing at 5673.
American markets have also suffered with Wall Street analysts admitting they have seen the worst ever start to a year.
Oil prices have collapsed by more than 70 per cent since their peak of around $115 a barrel in summer 2014, as large producers such as Saudi Arabia maintain production levels, putting US shale rivals under pressure.
Earlier this week, Bank of England Governor Mark Carney said there was no rush to raise interest rates amid a weakened world economy and slowing UK growth, which should keep the cost of mortgages down.