The stock market crash that decimated UK share prices in 2020 has devastated the retirement plans for a great many Britons. The FTSE 100’s plunge to eight-year troughs below 5,000 points erased almost all the gains made during the economic recovery that followed the 2008/2009 banking crisis. Similar shocking drops were seen across UK share markets and on overseas indices too.
A survey by Interactive Investor lays bare the extent of the crisis. Some 13% of respondents who are yet to retire say they’ll have to delay hanging up their work gloves. A whopping 33% said they would be unable to retire as they had originally planned.
The Covid-19 crisis has hit British savers with a double whammy. The economic consequences have hit income levels, raised unemployment, and damaged many of the public’s ability to save. It’s also decimated the value of a huge number of existing pension pots.
However, I don’t believe investors should stop buying UK shares to build a big retirement fund today. I’ve continued investing in my own Stocks and Shares ISA in 2020 and plan to keep doing so. Let me explain why.
Getting rich when UK share prices rally
Clearly, the stock market crash of early 2020 has significant ramifications for those close to retirement. According to Interactive Investor, around 20% of 60-71 year-olds they questioned who are yet to retire said they’d be forced to postpone their plans. And, shockingly, around a quarter of these said that they fear not being able to retire at all.
Those who’ve been burnt by tanking UK share prices this year might be tempted to stop investing in stocks. But it’s not something that I plan to do. Sure, the value of my Stocks and Shares ISA has also taken a battering in 2020. I sincerely believe stock prices will recover strongly during the economic recovery. And I’ve the weight of history to back me up.
Don’t forget that the FTSE 100 more than doubled in value during the nine years that followed the 2008/2009 banking crisis. It followed a pattern of strong stock market rebounds that characterised the last two centuries. This is why I’m confident the value of my retirement fund will come bouncing back. The global economy will rebound, corporate profits will recover, and UK share prices will soar again as investor confidence rallies.
Stock shopping to make a fortune
Unfortunately, this will come as scant consolation for many of those hoping to retire within the next few years. Still, for those who are a decade or more from retirement, there’s still plenty of time for the value of your UK shares to surge back to their pre-coronavirus peaks.
And so investors like me can still expect to build a big pension pot. Indeed, the 2020 stock market crash leaves a wealth of top-quality stocks trading at rock-bottom prices. These should soar in the eventual stock market rally and provide stunning returns over the longer term too.
The post Too poor to retire? I think buying UK shares in an ISA could help me build a huge retirement pot appeared first on The Motley Fool UK.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020