QROPS Update 9th August 2011 Pension income drawdown, flexible pensions & 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).

Tuesday saw UK manufacturing fall by 0.4% contradicting forecast of a 0.2% rise and the UK

trade deficit increase to £8.873 billion pounds from 8.1 billion. Industrial output was flat

which disappointed analysts who had forecast a 0.4% rise. This caused sterling to drop to

1.6321 immediately after the date from 1.6370, sterling did climb back to the 1.6381 by mid

morning, however these gains were short lived and we saw the pound slide throughout the

rest of the day against a basket of currencies, erasing gains made during Monday’s trading.

The sterling sell off could well have been caused by investors nervous of the outcome of the

Bank of England’s quarterly inflation report as some predict forecasts will be slashed today

for a second time this year, adding to fears that the recovery is in jeopardy. The Bank’s

quarterly inflation is expected to predict that GDP in 2011 will rise significantly less than the

1.8% it estimated in May, while next years figures may also be downgraded.

Calculations will not take into account the recent stock market meltdown, which has seen

the FTSE 100 index lose nearly 16% of its value, or £250 billion in the past two weeks. The

mayhem in financial markets could further weaken the UK’s economy by destroying

consumer and business confidence raising the risk of global recession, Mervyn King is

expected to caution.

The Monetary Policy Committee has recently warned that the euro zone debt crisis could

hurt the UK by dampening demand for exports. It was particularly concerned about how

much banks have loaned to struggling euro zone countries such as Italy and Spain. The Bank

is now expected to say that the worries over the global economy and the resulting stock

market slump could further endanger the recovery.

Adding to sterling woes were the rioting and looting which also darkened the outlook for

sterling as it pointed towards spreading social unrest. “Just a few days ago we were talking

about sterling as a new safe haven but these riots taking place are another blemish that

must have soured anyone’s taste for the currency” said a currency strategist at

Bank of New York Mellon.

IN THE UK

• Sterling gives back gains made against the Euro to hit a low of 1.1379 yesterday.
• UK manufacturing falls by 0.4 in the month of June and GBPUSD crashes from 1.6409 in early trading to hit a low of 1.6175
• UK trade deficit increase to £8.873bn from 8.1bn
• Adding to sterling woes were the rioting and looting which also darkened the outlook for sterling
• Sterling sold off ahead of the BoE inflation report today which is expected to show a bearish outlook, the pound has seen losses this morning across the board as investors fear for the worst.

ELSEWHERE

• Swiss Franc and Yen continues to soar as investors continue to use it as a safe haven, CHF is almost out of control as it falls towards parity against the euro.
• The US Dollar falls before Fed decision last night and then the markets are surprised as the Fed confirm they will be keeping US interest rates on hold until mid 2013. The report was very dovish and US economic forecast was downgraded. Perhaps this stance on interest rates will lead the US to embark on a third round of Quantitative Easing.
• S&P and Dow Jones both close up on the day and European Markets open with green screens this morning.
• Euro sees gains after eyes are averted from their debt crisis to look at the turmoil in the U.S
• AUD continues to be off due to sharp decline in commodity prices and contracting risk appetite
• German CPI this morning on par with consensus at 2.4%

DATA TO LOOK OUT FOR

• Highlight of the UK calendar toady is the release this morning of the Bank of England’ Quarterly Inflation Report and accompanying speech by Governor Mervyn King. Many expect the report to cast a disappointing outlook for the UK. After weaker than expected figures yesterday the pound will be very susceptible to any negative comments or nasty surprises.
• Busy day for Norway includes the release of the CPI figures with rate announcement later on, previous expectations were for rates to raise by 25bps but given the current global climate this might be left on hold for the time being.
• US Monthly Budget Statement is released at 7.00pm
• UK Nationwide Consumer Confidence is released today for July, June’s figure was 51 so a figure higher than this could help the pound slightly.

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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