How to weather Storm Corona: What virus panic means for your finances

Global markets were plunged into chaos this week after their worst day since the financial crisis of 2008.

More than £150 billion was wiped off the value of leading companies on what was dubbed the new ‘Black Monday’, raising concerns that we are heading towards a global recession. But while panicked traders speak of ‘utter carnage’, experts are calling on savers to grin and bear it.

Investments are long-term projects, and portfolios should be designed to ride out short-term shocks. 

Virus panic: More than £150bn was wiped off the value of leading companies on what was dubbed the new ‘Black Monday’, raising concerns that we are heading towards a recession

Calculations for Money Mail show that even if you had invested £10,000 in the FTSE 100 in June 2007, when markets were at their peak prior to the 2008 crash, your shares would still have a total return of £14,488 today.

Figures from investment platform AJ Bell also show that £10,000 invested in the FTSE 100 in 1985 would now be worth £156,547 if dividends were reinvested. 

This is despite the crash of 1987 and the 2008 financial crisis — whereas the same £10,000 left in savings accounts that paid the Bank of England base rate would now be worth just £54,733.

So could coronavirus cost you, and what should you do to mitigate your losses? Here, Money Mail talks you through everything you need to know.

Is it time to sell, sell, sell?

 Don’t ‘lock in’ your losses. After the initial slump on Monday morning, the market clawed back some of its losses over the next 90 minutes.

‘If you’d simply not sold until you’d walked the dog, you would have lost less money,’ says Steve Webb, a partner at pensions consultant Lane Clark & Peacock.

Investors should be thinking in terms of five years or more. Tom Stevenson, investment director at Fidelity International, says: ‘When markets hit rocky waters, jumping in and out should be avoided, or you run the risk of missing out on unexpected opportunities that might arise from market corrections.’

Now is a good time to assess your portfolio and take advantage of opportunities created following the virus outbreak.

Check that your portfolios are diversified. Include different assets such as property, cash and fixed interest across different sectors and regions as well as shares.

Laura Suter, personal finance analyst at investment firm AJ Bell, says it is also important to hold cash — although not too much. 

She says: ‘Cash leaves investors with scope to pick up bargains if they think stocks are being oversold. That said, money held in cash for the long-term risks being eaten away by inflation.

‘Gold may also be an option to help diversify your portfolio, although the price has already rallied a lot. 

If you wanted to buy, options include a fund of precious metal miners, such as BlackRock Gold & General or the VanEck Vectors Gold Miners ETF, which tracks the price of gold.’

But don’t overdo it. No one knows what is going to happen and you will rack up fees if you make panicked, short-term changes to your portfolio.

Mr Stevenson recommends a drip-feed approach, where you invest small amounts regularly.

Market crash cost us our first home 

A family has missed out on buying their first home after the stockmarket crash torpedoed their savings.

Katie and Carl Hunter had saved more than £12,000 into a lifetime ISA.

It meant the couple finally had the funds for a deposit for their dream four-bedroom house and were poised to make an offer.

Katie and Carl Hunter pictured with children Daniel, ten, Emily, eight, and Anoushka, six

Katie and Carl Hunter pictured with children Daniel, ten, Emily, eight, and Anoushka, six

But the plunge in global stocks has wiped £4,500 off their ISA pot, which now sits at around £7,500.

Katie, 32, who has three children – Daniel, ten, Emily, eight, and Anoushka, six – says: ‘We’re absolutely gutted. 

It just seems like three years of savings gone to waste. We looked at the possibility of getting a loan, but that would have affected the mortgage rate we have secured.’

Customer assistant Katie and account manager Carl, 33, initially invested £250 and continued to top up their ISA until it reached £9,000 — or just over £12,000 with the government 25 per cent top-up.

They also had £4,000 in a savings account, so finally had enough for a 5 per cent deposit — £16,500 — on a four-bedroom property in Ironbridge, Shropshire, which was selling for £324,950.

The ISA uses the funds saved to invest in the FTSE 100, which crashed by almost 8 per cent on Monday. 

Katie adds: ‘We’ve decided to scrap the idea of moving for now. We simply can’t recoup our losses in such a short period of time.’

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Will it affect my retirement? 

Ten million people are enrolled in workplace pension schemes that have been hit by the crash.

These tend to be defined contribution schemes and their value will fluctuate based on where the money is invested. But most will cover a range of assets and markets to mitigate risk.

Leading workplace pension funds have fallen by about 9 per cent since February 20 but have held up better than the UK stockmarket, which fell by around 19 per cent.

The value of defined benefit pensions, which are calculated based on your final salary, will not be affected by market turmoil.

Those approaching retirement will be hardest hit by a stock market fall, because their pots will have less time to recover.

But most plans start de-risking investments as you approach retirement age, which means your pension may have fallen less than you fear. 

Savers with old-style pensions may even have made money because they are largely invested in bonds, the value of which has risen.

Younger workers tend to have more of their pension invested in shares, but they have decades to make up their losses.

This week’s crash is only likely to have reduced gains made in recent years.

Nathan Long, senior analyst at Hargreaves Lansdown, says: ‘This could actually be a good time to make a lump sum top-up and buy into the market at lower prices.’

Recent retirees using income drawdown will probably be hit worse than those farther down the line. 

That is because your pot is larger at the start of your retirement, before you start withdrawing money, so a stockmarket crash will take out a proportionately larger chunk at this stage. 

The best way to mitigate this is to limit your withdrawals until the market has had time to recover.

If I can’t go away, will my insurer pay up?

 If you have booked to go away in the next few weeks or even months, experts recommend holding on to see what happens rather than cancelling.

Cancel and you risk losing money, even if you have insurance. This is because most policies won’t cover you for ‘disinclination’ to travel. 

If, on the other hand, the Foreign & Commonwealth Office (FCO) later restricts travel to your destination, or your hotel is shut down because a staff member contracts the virus, you should be able to claim money lost on flights, hotels, transfers and excursions, if you have the right level of cover.

Be aware that not all policies include cover for travel disruption due to a change in FCO guidelines.

As long as your policy includes cancellation cover, you should also be able to claim if you cannot travel because you, or a family member, fall ill with coronavirus or are required to self-isolate. 

However, Brian Brown, of Defaqto, says some insurers could refuse to pay out if it’s an employer rather than a doctor who instructs you to self-isolate.

If you have not yet bought insurance, policies should still cover you for coronavirus disruption provided you don’t yet have the virus and are not intending to travel to a destination the Government has advised against.

But as a rule of thumb, it is best to buy travel insurance the same day as you book your holiday.

Those who have booked a package holiday and their flight is cancelled or the hotel is closed should contact the travel provider.

You may be offered the option of moving your trip to a different date or an alternative destination. If you are unhappy with the options provided, you can request a full refund.

If you don’t have insurance and your flight is cancelled following FCO advice, the airline should refund you or reroute you regardless. You will not be entitled to additional flight delay compensation.

If your hotel is closed or an excursion is cancelled, you should also get your money back.

But if there are any problems, you can also claim a refund under Section 75 of the Consumer Credit Act if you paid by credit card, or request a chargeback if you used a debit card.

Should you be diagnosed with coronavirus before your trip, you must inform your insurer if it will affect your travel plans — they will need to check you are covered if you have to cancel later.

But if you are months away from travelling, experts say you don’t necessarily need to tell your insurer unless you think you won’t recover in time.

If you booked a flight or hotel using an air miles scheme and now need to cancel, you should get your points back under standard cancellation rules, according to Rob Burgess from air miles website HeadForPoints.

Savers braced for rate cut from the Bank of England 

Savers should prepare for yet another round of interest rate cuts.

The big banks have already slashed the rates paid to loyal savers in easy-access accounts to as low as 0.09 per cent.

Now, experts say things could get even worse after the cut in the U.S. Federal Reserve rate last week amid concerns over the impact the virus could have on the economy.

The big banks have already slashed the rates paid to loyal savers in easy-access accounts to as low as 0.09 per cent

The big banks have already slashed the rates paid to loyal savers in easy-access accounts to as low as 0.09 per cent

The Bank of England is considering whether to follow suit and cut our base rate from 0.75 per cent.

If that happens, savers stand to suffer further. Big banks — including Barclays, Halifax, Lloyds, HSBC, NatWest, Santander, TSB and Virgin Money — hold an enormous £674 billion in easy-access accounts paying rock-bottom rates.

The driving force behind savers opting for easy-access deals over better-paying notice accounts or fixed-rate bonds is the need for quick access to their money in uncertain times. 

But with the average rate on easy-access accounts just 0.5 per cent, they risk losing out.

The top easy-access account for those willing to go online is 1.3 per cent from Marcus by Goldman Sachs, which pays £121 more interest a year on each £10,000 than the poor Britannia accounts.

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Mortgages and house prices? 

 Mortgage repayments have been suspended in Italy while the country recovers from coronavirus.

Here in the UK, the Royal Bank of Scotland, which owns NatWest and Ulster Bank, says customers hit by the disease could qualify for a three-month break from payments.

Other banks may also let you take a mortgage holiday if you are badly affected.

Lloyds Bank has also pledged support for those affected, including no fees for missed payments on credit cards, loans and mortgages, and payment holidays.

When it comes to the property market, the ‘Boris Bounce’ is likely to be punctured by the uncertainty.

Capital Economics has already cut its UK price growth forecast for the year from 3 per cent to 2 per cent.

But stockmarket panic could lead to cheaper mortgages if it results in a cut in interest rates.

Investors predict the Bank of England will cut its base rate from 0.75 per cent to 0.25 per cent within weeks. This could make variable, or new fixed-rate mortgages cheaper, but cash savers will probably get less return on their savings.

What about UNI and school fees?

It is unclear what rights parents and students will have if coronavirus causes a school or university to shut down.

It is understood that each school’s policy is likely to depend on government advice as well as the context and circumstance of the closure.

There is no clear guidance on tuition fees either, but one university in Birmingham has already offered reassurances to this year’s international applicants.

Aston University’s website states that these applicants will be able to get their deposits refunded if coronavirus prevents them attending the first day of their course and they have to defer.

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We could lose our £20,000 dream wedding 

Otis Doyle and Inara Khan fear they could lose £20,000 if their wedding is cancelled due to coronavirus.

The couple are among thousands who risk being left out of pocket if they are forced to ditch their wedding plans.

Growing fears over whether weddings will be able to go ahead this spring have led to specialist wedding insurers, including John Lewis and Debenhams, suspending sales of new policies after couples rushed to buy the cover.

Wedding fears: Inara and Otis are among thousands of couples who risk being left out of pocket if they are forced to ditch their wedding plans

Wedding fears: Inara and Otis are among thousands of couples who risk being left out of pocket if they are forced to ditch their wedding plans

Even those who have already bought insurance are not guaranteed a payout if they have to cancel their wedding, because of policy small-print that can exclude claims arising from an ‘act of government’.

This means that, in the unlikely event that the Government bans weddings in this country — as Italy has done — couples could lose large sums of money.

Customers with no cover could be left out of pocket if the venue has to cancel because staff fall ill.

Inara, 31, and Otis, 32, who live in London, got engaged in New Orleans last April and are due to marry on March 28.

About 100 guests are set to attend their wedding at One Whitehall Place, a glamorous venue overlooking the Thames.

One guest has already said she doesn’t feel happy attending with her four-week-old baby.

And with guests flying in from Australia, Canada and New Zealand, the couple fear flight cancellations could also hit their big day.

They had sensibly bought a Dreamsaver Wedding Insurance policy soon after booking the venue last year. But so far their insurer has only promised to pay out if the venue has to close because of an outbreak of Covid-19, or if a close family member falls ill and so can’t attend.

The insurer says the couple will be covered only if most of their guests cannot attend ‘due to adverse weather’ — not illness.

Inara and Otis have spent £15,000 on the venue and £5,000 on a photographer, band and other items.

Inara, who works for the NHS, says: ‘There’s less than three weeks to go now and we are worried about what will happen.’

It is predicted that the spread of coronavirus will peak at the end of April, which is traditionally the start of the wedding season.

Venue: About 100 guests are set to attend Inara and Otis' wedding at One Whitehall Place, a glamorous venue overlooking the Thames

Venue: About 100 guests are set to attend Inara and Otis’ wedding at One Whitehall Place, a glamorous venue overlooking the Thames

Industry experts estimate 80 per cent of weddings take place between April and October. The average cost is thought to be £31,974.

With the arrival of coronavirus, some insurers have stopped selling wedding insurance. 

Others, such as Emerald Life, will not insure weddings taking place in March, April and May, while Wedding Insurance Solutions is refusing to accept new customers who are due to marry in the next six months.

So if you haven’t already bought cover, time may be running out. You may also find your policy won’t cover you for problems caused by coronavirus, as it is now a ‘known risk’. 

Customers who bought a policy before the clampdown will still be covered. But while you will have some protection against coronavirus ruining your big day, you are not always guaranteed a payout.

Many insurers say they will pay out if the bride, groom or a ‘close family member’ falls ill. Close family would typically include siblings but not cousins.

The key phrase is that their lack of attendance would make the wedding ‘inappropriate’.

If a large proportion of guests can’t attend, insurers will typically pay out only if this is a result of adverse weather conditions rather than illness — but check the wording. If a venue has to close on the day of a wedding because staff are ill, you should get a payout.

But if ministers introduce a blanket ban on weddings, insurers could point to a common exclusion that allows them to reject claims if the reason for cancellation is a change in government policy.

This will also affect couples marrying abroad. Italy — a top overseas wedding destination for UK couples, according to Hitched.com — has already banned all weddings. The Foreign Office is advising against ‘all but essential travel’ to Italy.

This means couples may not be guaranteed a payout and should call their insurer to find out where they stand. Your travel insurer should also be able to help cover the cost of lost flights and accommodation if the Foreign Office is advising against travel.

Steve Wardlaw, the chairman of Emerald Life, says couples should also check the contract they signed with the venue, as they may be entitled to some money back. Usually this depends on how far in advance you are cancelling.

If a couple decide they just don’t want to go ahead, this would probably be classed as ‘disinclination’ so they would not receive a payout from either their wedding insurer or travel insurer.

If guests choose not to attend because they are concerned about getting ill, couples may find they have to pay extra if their venue requires a minimum spend.

Experts have also warned that restrictions could cause a shortage of wedding dresses, as many are imported. Some stores are already adding a few extra weeks to delivery times, to make sure brides have long enough to get fitted if the dress arrives late.

A good wedding insurance policy should cover damage or non-arrival of ‘ceremonial attire’ — and coronavirus should not alter this.

Suppliers say they are calm at the moment but recognise the situation is getting more serious.

A spokesman for the Association of British Insurers, says: ‘Given the evolving nature of coronavirus and regular changes to public health guidance insurers are constantly reviewing the situation,’

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