Five things your clients will call you about this week

Fears about the markets following last week's sell-off and the US credit downgrade will no doubt dominate clients' concerns this week. However, the weekend papers also featured warnings about pension growth predictions and annuities, an analysis of absolute return funds and a closer look at UK smaller companies funds.

Market turmoil

The continuing market turmoil dominated the money pages of all the nationals and the Sunday Times tried to find answers to some of the key questions being posed by worried investors.

While urging against selling stocks at the bottom of the market, it also suggested absolute return funds and balanced portfolios as protection against new falls. While it was predicted gold will continue to climb into next year, there was also a warning about the dangers of a subsequent fall.

Pension growth predictions

Millions of investors are being misled about the likely returns of their pensions. That was the assertion of an article in the Telegraph, which looked at the growth projections provided in annual statements.

It explained how most pension firms use the regulator's standard projection rates, for example a low growth rate of 5%, a mid rate of 7% and a higher rate of 9%. In reality, however, it said most pension funds have struggled to return even 5% a year.

Tumbling annuity rates

Savers approaching retirement are being hit by a double whammy of crashing stock markets and tumbling annuity rates. That was the stark warning from the Mail on Sunday, which explained how Aviva, Prudential, Partnership and Legal & General have all cut annuity rates recently.

The cuts were triggered by a fall in the income insurers get from gilts and, with around a 5% plunge in annuity rates, this would result in around £300 less income every year for a man retiring with a £100,000 fund.

UK smaller companies funds

Despite the sluggish growth in the economy over the past 18 months, investors in UK smaller companies funds faired better last year than those looking for returns in China and India. With average returns of 30%, the Guardian explained how engineering groups and industrial conglomerates were driving the "small cap" revival in Britain.

However, for anyone looking to get on the bandwagon now, there was a warning of volatility and a reminder of how small company shares were hit particularly hard when the banking crisis struck in 2008.

Absolute returns

They have a name which seems to reassure investors and they've become increasingly popular in recent years: absolute return funds. The Independent on Sunday took a closer look and explained how they could be trapping unwary investors, with "decidedly second rate" performances and fears they could be "the next mis-selling scandal".

Among the prblems was the diversity in the sector and the complex strategies employed by managers, while investors may not be aware they only aim to outperform cash returns, rather than a stock market index.