Archive for February 2019

Gino Rocco

The recent decision in the Lloyd’s case answered a question which has remained unanswered for decades, namely do trustees need to equalise GMPs? The High Court, made it clear that trustees are obliged to equalise GMPs. However, it is not quite “problem solved”. This is because some legal points remain to be clarified by the court. Also, the DWP is expected to provide guidance on the matter in due course but this may be delayed by Brexit, in that the government has other more pressing priorities than GMP to deal with.

Although the case provided some clear guidelines, employers and trustees will need to decide the preferred approach to GMP equalisation. There is likely to be a second hearing to decide whether trustees have full discharge on transfers-out, so trustees will have to decide how they wish to approach transfers out. Do they make a payment now or do they wait for further guidance? It would be a brave set of trustees that equalises GMPs before DWP guidance is published. There are also potential tax implications to any transfer payments which may need to be topped up at later date. The effect of all of this is continued uncertainty to a point and trustees should take legal and actuarial advice before committing to equalise GMPs.

One key thing that trustees can do is to ensure that they communicate clearly with their members about what they are doing about GMP equalisation even if they are deferring until the DWP guidance is published.

Brendan McLean

Markets performed very well in January with the MSCI World up over 7% in USD. This was driven by the US Federal Reserve signalling that it may not raise rates as fast as previously indicated. Also, US/China trade relations are improving, which resulted in the MSCI China Index being up over 11% in January in USD. However, even with the strong returns most asset classes have not recovered from last quarter’s negative performance.

Despite the improving US /China trade tensions assisting in boosting equity markets in January, the US economy is beginning to see effects of this trade war as leading indicators such as the ISM manufacturing survey reported its largest monthly decline since 2008. The tensions have had a greater effect on China, which has resulted in the monetary authorities having to provide stimulus to the economy. Europe has also been affected by the trade dispute, mainly caused by slowing Chinese demand for manufacturing equipment.

In the UK, Brexit continues to dominate the news in the run up to the exit from the EU on 29 March 2019. Throughout January, a number of votes held in Parliament indicated that the majority of MPs are against a no-deal scenario and would support May’s deal if she can re-negotiate the Irish border backstop, however, the EU have so far said this is not an option. If she can receive concessions from the EU regarding the backstop then it is possible that a version of her deal could pass in parliament. Sterling increased on the possibility of a deal being reached. There could be increased volatility in markets if there is no deal agreed by the March deadline, as markets seem to be pricing in some kind of deal at the moment.

In January, Italy officially went into recession, which is defined as two successive quarters of economic contraction. This result did not surprise markets, as over the last six months the new Italian government has been in a dispute with the European Commission over the size of its government’s spending budget.

Despite the bounce in markets in January, we expect them be volatile going forward and Trustees should continue to monitor their investments and speak with their advisors to ensure their investment strategy remains suitable.

Andrew Kerrin

Over the past weeks, living in the UK, you’d have been forgiven for thinking that there was nothing else going on in the world apart from Bre… well, you know what I was going to say – I’ll spare you from hearing the word for once.

Before ‘that-which-shall-not-be-named’ took over our lives, there were other news stories, other events, other happenings in the world that equally shocked us and exercised our opinions.  One of those other sources managed to do his best in the past weeks to grab back the news agenda – the 45th President of the United States.

January has been a tough month across the pond – particularly for the 800,000 federal employees who went without pay checks.  However the story that caught my eye was the initial refusal by the Speaker of the House, Nancy Pelosi, to formally invite the President to give the annual State of the Union address to Congress.  Like the size of a recent loss by the UK Government in a House of Commons vote on ‘that-which-shall-not-be-named’, this action by the Speaker was unprecedented.

“What has this got to do with this Quarterly Update?”, I hear you ask. Well, what this reminded me of was the wording of the clause in the US Constitution that the State of the Union Address stems from, namely that the President:

“shall from time to time give to the Congress Information of the State of the Union, and recommend to their Consideration such measures as he shall judge necessary and expedient.”

In that spirit (assuming that unlike Nancy Pelosi you have invited Spence to address you!) let us give to you this quarter’s Information on the State of the Pensions Union, along with our recommendations, for your consideration, of all the necessary and expedient measures you may wish to take.

We hope you find this useful and look forward to addressing you again in three month’s time… if ‘that-which-shall-not-be-named’ allows us!

Topics included in this quarter’s address include:

• The PPF’s 2019/20 Levy Rules determination
• Investment Market Update
• HMRC and The Pensions Regulator Warning over Member Tax Relief
• Master Trust triggering events
• The Supreme Court judgment in the Barnardo’s case
• GMP Equalisation
• PPF Purple Book
• And of course… an update on ‘that-which-shall-not-be-named’

Download the Quarterly Pensions Update Q4 2018

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