Stock markets were hit by a day of fresh turbulence amid continued fears over Donald Trump’s trade wars, wiping billions of pounds off the value of UK pension pots.
But savers have been encouraged not to withdraw their funds in a panic following the third straight day of major falls in the FTSE 100.
And Sir Keir Starmer fought to keep calm in a bid to signal to businesses that the Government will support the economy in an era of global chaos.
The FTSE, which measures the value of the biggest 100 firms listed on the UK stockmarket, fell by 4.4 per cent on Monday after significant declines in its value on Thursday and Friday.
US markets fell steeply when they opened, as did Asia-Pacific stocks, sparking fears of a recession.
Wall Street’s benchmark stock index, the S&P 500, was set to enter bear market territory on Monday after falling 20 per cent from its record high set in December. A bear market is defined as a period of sharp declines in stocks which typically reinforce selling as investors panic.
However, at one point US stocks rebounded and started trading higher, peaking at about two per cent, seemingly on the back of false news that was spread online suggesting Trump was going to pause the introduction of tariffs for 90 days. Once it became clear this was not happening, the market plummeted once again.
Over £6trn is thought to have been wiped off the value of global stocks since last Wednesday, when Trump unveiled large tariffs on trading partners around the world.
The decline in the value of shares will have reduced the value of pension pots in the UK by billions of pounds, but experts encouraged savers not to act rashly with snap decisions about the future of their investments.
Mike Ambery, retirement savings director at Standard Life, said: “If you have a defined contribution pension – which are now the most common arrangement in the private sector – then the most important thing to think about is if whether you plan to make any significant withdrawals, like accessing your 25 per cent tax-free cash (lump sum) imminently.
“There is a risk if that if you make a significant withdrawal while markets are lower then you not only get a smaller lump sum but also leave less scope for your remaining pot to recover in which case it’s important to take a view on whether now is the best time to start accessing your money and whether you can afford to wait.”
Sir Steve Webb, a former pensions minister who is now a partner at LCP, added: “My feeling is that it’s a brave person today who thinks they have a pretty clear idea where markets will be in three months’ time. So, for example, if you delay taking your lump sum to ‘wait and see’ if the value recovers, how would you feel if instead markets fall further?
“While if you want specific advice for your circumstances, you should consider seeking financial advice, it is generally true that you shouldn’t access your pension until you need to do so, so that you stay invested and, over the medium to long term, hopefully see your pension grow. By-and-large, this remains true even when markets have been very volatile.”
The Government is not expected to intervene directly to shore up the value of stock markets as ministers do not believe there is any systemic threat to the UK’s financial system.
Instead the Prime Minister will spend this week arguing that his plans to boost economic growth will help British businesses weather the global economic storms.
Speaking at the Jaguar Land Rover factory in Solihull, West Midlands, Starmer said: “We have chosen to come here because we are going to back you to the hilt.”
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He added: “There is no doubt about the challenge, but this is a moment for cool heads. No one wins from a trade war, but it is also a moment for urgency.”
The Prime Minister announced he would relax regulations on clinical trials to encourage the UK’s life sciences sector, and further interventions are expected later this week.
He promised “British cars for British workers” and praised “the link between manufacturing and who we are as a country”, claiming that the last government had failed to support UK industry.
Andrew Griffith, the Conservatives’ shadow Business Secretary, said in response: “‘This speech is thin gruel for families and businesses who are being punished with higher costs, more expensive cars and higher bills thanks to this Labour government’s mad rush to net zero.”
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