News Publication date March 14, 2023

Volatility of markets on policy values

What is driving the volatility

There has been uncertainty in the markets since the start of the war between Russia and Ukraine and this has been felt by investors across the UK. It has had an impact on the value of unit-linked funds and most policyholders will have seen a drop in the value of their savings since their April 2022 Annual Statement.

We want to provide you with some reassurance that this is not an Utmost issue but an issue that all life and pension providers are facing. In addition, it is important to remember that life and pension products should be seen as long-term investments, where observing daily falls in value might lead you to make short-term decisions without consideration of longer-term recovery.

Historically, prices rise and fall in reaction to what is happening in the world but these fluctuations often balance out over the longer term. To bring this point to life, please click here to see a graph that shows a £10,000 investment over the last 30 years and you will see that a positive return has been achieved despite events that have had short term negative effects.

We are currently seeing higher levels of volatility in reaction to world and political events. A recent example of this is how the markets reacted to the ‘Mini’ Budget by the UK Government in October 2022.

What we/our fund managers are doing

Fund managers try to anticipate future investment performance and they make allowances for that in their investment strategy and pricing. Where it does become more problematic is when there are unforeseen changes or news that does not meet expectations and this is exactly what happened with the ‘Mini’ Budget in October 2022. There were parts of the budget that came as a surprise and this caused significant reaction in the UK markets.

We know that this uncertainty can be unsettling but we can assure you that we are working with our investment managers, who continue to follow developments very closely, to look after your investments in these difficult times.

It is not always prudent to make hasty decisions when the markets are so volatile and we have every confidence in our investment managers making the right calls in line with the approach we have agreed with them.

Click here to see a short visual presentation from J P Morgan called ‘Seven Principles for successful long-term investing - Tried and tested techniques to achieve your financial goals’, which we think you may find interesting.

Things for you to think about

Whilst it may be tempting to take your savings when markets fall, deciding the right time to do this is difficult and, for many, continuing to hold for the longer term might end up being the right answer.

When making decisions about taking your savings, we would encourage you to think about your circumstances, for example, do you need to access your savings now? The risk you will take by taking savings when prices are low is that you will lock in those losses and may miss the opportunity to see your savings grow when the market turns.

Where you can get further information

Our website contains information on all our unit-linked funds and we encourage you to regularly review your investments to ensure they continue to meet your needs and how much risk you want to take with your savings. We also recommend you get financial advice before making any decisions.

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