QROPS update 21st November 2011 Pension drawdown & QROPS and QNUPS

At Gerard Associates Ltd we continue our daily look at factors affecting markets and currencies allowing some insight into conditions affecting exchange rates.

Cash and income timing from a UK Pension income drawdown, flexible pensions or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension drawdown, QROPS and investment income taken.

Investment market volatility and currency exchange remains a challenge. The global economics are volatile and unprecedented in history. Currency exchange continues to concern expats with UK Pensions, income drawdown now including flexible pensions, a QROPS and QNUPS (Qualifying non UK Pension schemes).

IN THE UK

• Sterling held its ground across the board despite concerns about growth, following stronger than expected Retail Sales data late last week.
• Rumours about further QE may take more of a back seat following the surprise in Retail Sales but given the outlook for sterling it would take continued upside surprise in Q4 data to keep those rumours out of the market.
• Sterling is still likely to be driven by concerns surrounding the Eurozone rather than data closer to home, with the focus this week on Mario Draghi and Eurozone debt auctions.
• UK consumer confidence survey released late last week showed it had fallen to a record low in October.
• Analysts over the weekend were discussing the pounds recent performance giving it some form of ‘safe haven’ status, probably due in some part to a lack of a suitable alternative as both Japanese and Swiss central banks have intervened to weaken their currency. The US economy is still struggling and investors have started to think the UK’s relatively safe triple A credit rating and low rates on bond support the UK as a safe bet.   
• This morning sees a ‘risk off’ start to the day with sterling falling to a 1 month low vs the US dollar of $1.5687.

ELSEWHERE

• Talk that the ECB may consider unlimited euro debt purchases have been heard late last week, however the new president Mario Draghi didn’t sound quite soon keen and reports over the weekend even suggested that he may do the opposite and cut back on the ECB’s debt purchases.
• Debt auctions this week may be affected by Mario Draghi’s decision on the best way forward as mentioned above, with debt auctions for France, Spain and Italy all scheduled for this week.
• AUD and CAD both suffer at the end of last week as commodity based currencies struggle following stronger numbers from the US. 
• The US have two days left to propose a 10 year deficit reduction of at least $1.2 trillion. The markets are expecting congress to fail to meet Wednesday’s deadline partly explaining this morning’s risk aversion. In the summer we saw how difficult it was to for US lawmakers to agree to raise the debt ceiling limit and if they struggle again and sustainable spending cuts are not set forth, the United States could be facing another debt downgrade within the next week.

• Although Spanish and Italian bonds fell back on Friday they were far from what would be considered reasonable and are still classed as critical, Spanish bonds were at 6.78% last week, too close for comfort to the critical 7% level.

• A debt downgrade will undoubtedly affect the US dollar’s safe haven status and cause it to weaken in the long term, however for now, the markets are likely to remain averse to buying riskier assets which will actually help the US dollar strengthen in the short term.
• Over the weekend the Spanish Socialist party were overturned, the new Prime Minister Mariano Rajoy has a difficult job as immediately has to implement tough austerity measures to reduce the deficit of the nation in much the same way as Greece, Ireland, Portugal, Italy and the UK.

DATA TO LOOK OUT FOR (all times GMT)

• A fairly quiet day for important data in the Western trading sessions comprises Wholesale Sales in Canada at 1.30pm
• Existing Home Sales data is released in US at 3.00pm, the rate of decline in home sales is expected to improve from -3.0% to -2.2%, if realised this would show a healthy improvement and outlook for the US economy.
• American, British and German growth figures are due between Tuesday and Thursday; all are key for determining how much more easing each of their respective central banks will introduce to markets.
• The most important event on the week comes on Wednesday, when the US Joint Select Committee on Deficit Reduction faces its deadline.

Gerard Associates Ltd advises UK residents, expats and people considering living abroad on the technical and currency options available for Pensions, pension income drawdown, flexible pensions, QROPS, QNUPS and investments in a clear format allowing all customers to make an informed choice. Our service encompasses Pension including QROPS and QNUPS and investments in a clear format allowing all customers to make an informed choice.

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