There's a big shock coming.
It isn't what you think it is either, it's under the surface bubbling and churning, just waiting to explode.
You see, pension pots are mostly invested in the stock market and the stock market has crashed, the latest BoE figures say that April - June will see 25% economic shrinkage. However, the vast majority of this is artificial, the banks are funded, there is sufficient liquidity and the government is solvent, in fact the BoE predicts a sharp economic bounce back once restrictions are lifted:
Stock market values have taken a hit, as have the employment figures, especially in certain industries, you may have seen the oil price dip below $0. That was again artificial, lockdown leads to low consumption that leads to storage issues for mass produced products such as oil that come from production processes that are very difficult to stop.
Pension pots that are heavily invested in certain industries are going to be hit by dividend cuts and huge value drops
The FTSE 100 gained 0.4% to trade around 5,870 on Thursday, with miners and retailers among the best performers, as global market sentiment was supported by an unexpected rebound in Chinese exports following a restart in factory activity after the coronavirus pandemic. Meanwhile, the Bank of England left interest rates at record lows and its target for bond-buying at £645 billion. Still, policymakers signaled willingness to increase its asset purchase programme as soon as next month to support the economy severely hit by the coronavirus crisis. The BoE sess the economy shrinking by 25% in the April-June period and by 14% in full 2020, before rebounding by 15% in 2021.
The letters will probably start arriving in mid June and the news will be full of doom and gloom (when isn't it) around people's pension difficulties.
How does this affect the property market?
Elderly living facilities will be impacted but I don't think much else will be. People with private pensions often have fully paid up mortgages and live in homes they've been in for a long time before swapping out to smaller homes and bungalows.
What will be affected are their holidays, home upgrades, cars and other parts of their lives that add a modicum of comfort.
People tend to forget that pensioners have lived through tough times, they know how to be thrifty, save things, reuse them and make ends meet, they're battle hardened already.
However, the pension crisis of 2020 - 2021 is coming and you heard it here first (probably).
Add a comment and tell me what you think... Happy to be proven wrong!
Hi, I'm Martin Howard and I authored this article. I lead up the Key Properties group, we are a sourcing, development, estate and letting agents that operates mostly in South Wales. We typically over achieve on our projects and deliver great returns to our investors. Email me: firstname.lastname@example.org if you want to chat or WhatsApp, call or message 07851 873995. Thank you for reading 😀😀