QROPS update 24th August 2011 Pension income drawdown & Foreign exchange 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).

On Tuesday, the markets were looking at data releases from all the major economies after

the lack of news from the previous trading day. The better than expected German

manufacturing data boosted the Euro, and this in turn helped push up the Pound against the

US Dollar. These gains were somewhat restricted as traders anticipated a report released

mid-morning in the UK that was expected to show a downturn in factory orders. Sterling

continued to benefit from investors seeking out safer alternative currencies despite not all

being rosy in the UK economy. The Euro-zone debt problems and continued weakening

growth in the United States have done nothing but help the appeal of the British Pound.

Investment in other currencies across the world, namely the Swiss franc and Japanese yen

has dampened due to the risk of state intervention creating sudden volatility.

“Sterling is gaining because it is not the Euro and not the Dollar and people have been

rewarding the UK government’s efforts to cut borrowing,” said a currency strategist at nabCapital.

In Germany, Europe’s biggest economy, output grew across both manufacturing and services

but showed the weakest rate of expansion for almost two years. The French service sector

saw growth pick up in August but manufacturing output fell for the first time since June

2009. Outside the Euro-zone’s two largest economies, output fell for the third month in a

row.

The Eurozone economy grew only marginally again in August, suggesting that recent months

have seen the weakest expansion for two years,” said Markit’s chief economist. “The data raises the prospect that economic growth in the third quarter could

be even slower than the disappointing 0.2% rise seen in the three months to June. Most

worrying is the near –stagnation in Germany, which suggests that the region’s main engine

of growth has stalled.”

As the morning carried on, GBP received a surprise boast from its back yard as a survey from

the CBI showed that UK manufacturing orders have been better than expected in August.

The Industrial Trends survey found fractionally more manufacturers reporting orders above

normal than those reporting below normal levels. This showed an improvement from July

and the latest survey also found price pressures had begun easing after six months of high

inflation. There was however a warning that there could be trouble ahead for UK

manufacturers.

“Inflationary pressures have eased since the start of the year, with fewer firms predicting

they will have to raise prices at the factory gate over the coming quarter,” said Richard

Woolhouse from the CBI. “But the risks to manufacturing activity and business confidence

have if anything increased, due to market volatility and the recalibration of growth

expectations worldwide.”

UK data being released later this week include a CBI survey on retail sales on Thursday and

the second estimate of second quarter GDP arriving on Friday. The major release of the

week comes out of the U.S. as investors await U.S. Federal Chairman Ben Bernanke at the

central bank conference and how he may intervene further to revive their struggling

economy.

IN THE UK

• Sterling makes gains against the US Dollar as it reacts positively to German manufacturing data.
• Pound receives an unexpected boost from a better than expected UK manufacturing survey which reported an ease in inflationary pressures.
• Manufacturers warned of tough times ahead due to market volatility & recalibration of growth expectations.
• Positive GBP sentiment was also helped further by an unexpected increase in BBA mortgage approvals.  
• GBP/USD traded between the ranges of 1.6453 & 1.6572.

ELSEWHERE

• In Germany, data showed output grew both in manufacturing & services but at the weakest rate for nearly two years.
• Richmond Fed manufacturing data was worse than expected and New Home Sales fell more than expected which failed to bolster the USD
• Investors count down the hours to the Jackson Hole speech on Friday where Ben Bernanke will address the pressing issues facing the US economy. Will there be further intervention and could this be the start of the QE3
• Eurozone debt problems are still pressing as Finland threatens to withdraw from Greek bailout because of serious lack of collateral. Media suggests that other countries are looking at non cash assets for collateral such as property and land in Greece.
• Moody’s downgrade Japan from Aa3 from Aa2 but level outlook at stable.
• EURUSD has a strong morning in the Asian heading towards 1.45 but falls as the European markets open as German IFO figures in all components drop below the consensus expectations.

DATA TO LOOK OUT FOR

• At 10.00am Eurozone Industrial New Orders are expected to show a slight decline to 11.9% on an annualised basis.
• US MBA Mortgage approvals at 12.00pm will give a indicators of how the US housing market is performing.
• US Durable Goods Orders are released at 1.30pm, a healthy rise to 2.1% is expected which could help the US dollar recover some of its recent losses.
• Retail Sales in New Zealand published at 11.45pm this evening are expecting to show a decline to 0.6% in the second quarter from 0.9% previously.

 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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