QROPS update 31st 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).

Further talk of Eurobonds and the decline in both German and British consumer confidence

meant that the markets saw a broadly balanced morning after the UK bank holiday. It

should be noted that sterling did drop off against the euro from a high of 1.1343 to a sub

1.13 (1.1281) rate at the close of the European session.

The markets are still murmuring about Greek collateral, Eurobonds, the slowing pace of

German growth, and whether the Central European Bank was wrong to increase rates twice

this year but these Eurocentric topics did not attract attention away from the negative data

posted in the UK; and the strengthening of EUR suggests that whilst policy makers discuss

strategy behind closed doors, risk appetite has gradually crept back into the market.

US consumer confidence followed that of the UK coming through at 44.5; significantly less

than the 52.1 expectation, and over 10 points lower than the previous month. Some have

argued that the strong Yen, and fears over Japan’s ability to export, has permeated into the

mind-set of the US consumer; and it will be interesting to see how the dollar reacts to ADP

non-farm payroll figures released later today.

The market will be watching keenly as the G7 Nations meet in Marseilles later in the week.

One topic of conversation will surely be the plans suggested by Italy with regards to their

most recent austerity package. Having assured the market that it could be implemented

rapidly, it would seem that Berlusconi, maybe bolstered by Italy’s re-entranced to the bond

market to refinance €1bn of debt, may push for further consideration of the ‘pay-to-stay’

Greek collateral issue.

The markets have been mixed, and are likely to continue to be so until the end of the month.

It would seem that this drop in the pound has been further compounded by many fund

managers wishing to appear to hold gold. Sterling has lost ground against USD, as well as

seeing a choppy time against ZAR, which suggests that the end of the month could see the

sort of window dressing that animated the end of last month too – such a perspective lends

weight to the view that the pound may improve as we enter September and European policy

is laid bare.

IN THE UK

• The UK market open saw sterling move a fraction higher than the previous weeks close on the back of market gains in the US and Europe. However the pound failed to hold on to the gains and hovered around the 1.1270 – 1.1310 range.
• Net lending to individuals is down on expectations at negative 0.9bn, but up on previous month by 0.5bn.
• Mortgage approvals in UK reach highest in 14 months during the month of July, but the property sector is suffering with average property price at £200k, but average earning at £25k, thus keeping first time buyers out of the market.
• Bankers say put reforms on hold until markets and economy recover

ELSEWHERE

• EUR strengthens against USD on the back of recent comments from Jean-Claude Trichet, pushing above the 1.44 level.
• Further call for the Bank of Japan to correct its currency as the strength seen in the Yen is weighing heavily on export activities.
• On 29th US pending home sales come through significantly below forecasts.  Data posted show a negative 1.3% with expectations at a mere negative 0.8%.
• New draft of Italy’s second austerity package envisages halving the number of parliamentarians
• One Italian town has ditched the single currency in favour of minting its own coins – this comes on the back of renewed sentiment in favour of a euro bond to aid the Eurozone debt concerns.
• The race to come up with a Eurobond proposal that avoids changes to EU treaties has begun.
• Indian economy grew 7.7% in the three months from April to June.
• The National Bank of Greece posts a €1.3bn loss.
• US consumer confidence drops dramatically and the Fed minutes released yesterday reveal a difference in views of the members, however most are welcoming further QE whilst others.

DATA TO LOOK OUT FOR

• Eurozone CPI is released today at 10.00am and will show where inflation currently stands, the markets are expecting the figure to remain in line with last months figure at 2.5%
• In the US 1.15pm sees ADP Employment change, this months figure is expected to fall to 105k from 114k last month.
• Canada’s Q2 GDP is released at 1.30pm, the last figure posted was 0.3% the Canadian government will be hoping to see that move comfortably back over zero.
• US Factory Orders for July is released at 3.00pm and Fed member Lockhart speech at 5.30pm finishes off the significant data for today.

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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