Billions of pounds have been wiped off the value of investment and pension funds after a year of turmoil in the stock market, with the FTSE 100 index of leading shares plunging more than 2,700 points.

House prices have also been heading south, falling 13 per cent in the past 12 months, according to the Halifax house-price index.

If you are not in a hurry to sell, you have plenty of time to ride out the storm. Unfortunately, there are hundreds of thousands of people who do not have that luxury. For them the crisis is already causing real financial woe. We offer these unwitting victims of the global downturn some timely advice.

Ruined retirement

Tumbling share prices have wiped a fifth off the average pension fund in the past 12 months, with some savers suffering falls of up to 57 per cent.

Most at risk are the hundreds of thousands of workers approaching retirement. Not everyone will suffer the full force of the dowturn. Investors in final-salary pensions should be unaffected, while many money-purchase schemes move your money from shares to cash automatically in the run-up to retirement.

However, money-purchase savers who have remained in equities have had their retirement plans cast into doubt. Also in trouble are those who have already retired and opted for income drawdown. These schemes are popular with investors who do not want to be locked into an annuity. They allow you to take an income from your pension fund, which remains invested.

If your fund does not grow quickly enough to cover the income withdrawals and charges, it will start to shrink, making it harder to keep up the income payments without depleting the fund. After markets have plummeted, investors are being warned that they could be forced to take a cut in their income.

David Marlow, of Alexander Forbes, the independent financial adviser, says: “If you have lost money in the run-up to retirement, the more flexible you can be the better. Though drawdown can be risky, it does give you the chance to remain invested and make up any losses.”

Mr Marlow suggests dividing a drawdown fund into cash, bonds, property and shares. When shares fall you can take income from the cash and bond layers. “The problem is that you need a substantial fund to make this work,” he says. “If the only option you feel comfortable with is buying an annuity, make sure that you shop around for the best deal.”

Accidental landlords

Homeowners who cannot sell are becoming accidental landlords as they are forced to let their properties and wait for the housing market to improve. The number of properties to let has hit record levels in recent months, figures from the Royal Institution of Chartered Surveyors show. And many reluctant landlords are finding that renting a property is fraught with difficulties.

Melanie Bien, of Savills Private Finance, the mortgage broker, says: “Borrowers are legally obliged to inform their lender if they plan to rent out their home because this is part of the mortgage contract. If you do not inform your lender, you are in breach of contract and the lender could, in theory, refuse to play ball in future if you wish to remortgage.”

Once you tell your lender, the action that it takes will depend on its own criteria. Norwich and Peterborough Building Society, for example, will allow a residential mortgage customer to continue on an existing scheme for 12 months. Other lenders will charge a premium on the interest rate, while some will insist that you switch to a buy-to-let mortgage.

It is important to do your research on whether it will be easy to rent out the property and how much to charge. Check local rental rates in estate agents' windows and in local newspapers. Do not forget to budget for maintenance and letting costs.

In addition, landlords must now provide new tenants with an energy performance certificate (EPC) or face a £200 fine. The EPC gives your house a rating from A to G on energy efficiency. It costs about £100 and is valid for ten years. To find an accredited domestic energy assessor, go to hcrregister.com

Care home dilemma

Families with elderly relatives in care are struggling to cope with huge interest charges on their nursing home bills because of falling property prices. Nursing Home Fees Agency, the specialist financial adviser, says that it has been receiving calls daily from families that are unable to meet their care costs.

Under the English system, anyone with savings or capital of more than £22,250, including the family home, is required to pay for his or her own care fees 12 weeks after going into care. If your estate is worth more, the local authority can insist that you sell your property to meet the bills.

However, families told that they must sell up are finding that it is impossible because of the slump in the property market and are being forced to run up debts with the home or council. Some private care homes are making matters worse by charging interest on the money owed, leading to accusations that they are cashing in on the misfortune of families hit by the property downturn.

One alternative is to take out a “loan” from your council to cover the fees while your home is for sale. This is sometimes referred to as interim funding. Local councils are not, by law, allowed to charge interest on care-fee debts while the person is alive. However, they can start charging interest 56 days after he or she has died.

Philip Spiers, of First Stop Care Advice, the specialist financial adviser, says: “Interest charges of 6 per cent to 7 per cent are not uncommon, while some homes and councils are charging as much as 9 per cent, which seems extraordinarily high.”

Mr Spiers suggests that you check first what interim funding is available from your council, as you will not be charged interest straight away. Unfortunately, it may not be willing to lend enough to cover the full bill. Costs average about £660 a week for nursing homes but can top £1,000 a week in London and the South East.

If you cannot pay what you still owe from other savings, consider renting out your property. Rental income is not included in the care homes mean test. The family home is also exempt if the husband, wife or civil partner of the person in care is still living in it - and the council cannot insist that the property is sold.

Inheritance tax headache

Falling house prices are a big problem for families with an inheritance tax (IHT) bill to pay on a property that they are unable to sell.

IHT is charged at 40 per cent on the value, at death, of a person's estate over the nil-rate threshold of £312,000 (£624,000 where the spouse of the deceased had already died and the deceased inherited everything).

You are expected to start paying the tax six months after the death occurred. Many families need to sell the home to pay the tax bill, but the slump in the housing market has made this virtually impossible.

Equally worrying is the prospect of paying tax upfront on a home that turns out to be worth tens, or even hundreds, of thousands of pounds less when it is sold.

You can pay the tax in annual instalments over ten years, but you must write to the Revenue to tell it that you want to do this. If you pay the first instalment on the due date six months after the person died, there is no interest to pay on that. However, interest is charged on the other nine instalments, currently at 4 per cent.

If the property sells within four years for at least £1,000 less than the value at death, you can claim tax relief, using form IHT38.

Case study: Rental returns are hard graft

Juliet Payne, a reflexologist who splits her time between Stow-on-the-Wold, Gloucestershire, and London reluctantly became a landlord after failing to sell a flat in the capital in the summer.

The 35-year-old, left, decided to put the flat, in Fulham, up for sale after marrying her husband, Mark, in June. The couple wanted to buy a home in the Cotswolds but could not afford it without selling Ms Payne's flat first. When the property went on the market it became apparent quickly that buyers were few and far between and it was not going to sell at a price that Ms Payne would be happy to accept.

The couple decided to rent rather than buy a property in Gloucestershire and let out the London flat to raise some extra cash. It has been a financially beneficial move because the rent they receive covers the mortgage repayments and some of the rent that they have to pay in Stow-on-the-Wold. It took only three days to find suitable tenants for the flat, but it has not been easy.

Ms Payne says: “Rather than dropping the price, renting seemed like the sensible thing to do. However, I was not prepared for the amount of work involved. We employed a letting agent to find a tenant but have decided to manage the property ourselves. There is a lot to do on the administration side, what with protecting deposits and maintaining the property.”