Calm urged as FTSE drops to seven-year low

Investors were urged to sit tight today as the FTSE 100 looked set to close at a new seven-and-a-half year low.

Financial advisers told their clients to stay calm and not cash in their investments, despite the top flight index being down 127.8 points at 3324.9 by lunchtime.

Nikki Foster, savings and investment manager at Chase de Vere, said: “We are saying the same to our clients as we always do – try not to panic and sit tight.

“The last thing you want to do is cash in your investments because then you won’t be invested in the market when it does recover.”

She added that now was a good time to think about buying shares as values were so cheap.

Robert Guy, of Timothy James and Partners, said: “From what I can tell this looks like the last bit of war nerves driving the market down.

“If you have ridden it all the way down from 6,000 I wouldn’t let today’s activities sway you.”

He added that they only people he would advise to cash in their investment were people who were in technology funds, which was the only area he could not see coming back.

But the falls were further bad news for company pension funds which are finding it increasingly expensive to offer final salary schemes.

The National Association of Pension Funds estimates around £10.8 billion could have been wiped off company schemes in today’s fall.

But it stressed that pensions were a long-term investment and people should not panic.

A spokeswoman said: “It’s important to remember that pensions are a long-term investment. Short-term changes in the market level out in the long run.

“Companies have been under a lot of pressure for some time. There are a number of factors which have contributed to final salary schemes’ closure and stock market falls are just one of these factors.”

The falls in share prices were also bad news for people with endowment mortgages, many of whom are already facing a shortfall when their policy matures.

The Association of British Insurers urged policyholders to remember that endowments were a long-term investment.

It added that three-quarters of people with the policies held them in with-profits funds, which aim to smooth out stock market volatility during the course of the investment.

It also means that although stock market falls will hit the growth of the policies, any money already accumulated will not be affected.