Stuart Yeomans

• Nonfarm payrolls fall in wake of hurricanes
• Catalonia expected to declare independence
• Global economy continues to purr
• Fed short list makes rounds
• Trump expected to de-certify Iran nuclear deal

Global equities extended their gains this week, with the MSCI All Country World Index hitting a record high. Solid economic data and hopes for a tax reform package helped push the yield on the US 10-year Treasury note to 2.38% from 2.32% a week ago. West Texas Intermediate crude oil slipped to $49.50 a barrel from $51.50 last Friday while equity volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), closed at a record on Thursday and traded at 9.50 early Friday.

US payrolls fall for first time since September 2010 
Hurricanes Harvey and Irma combined to bring an end to a seven-year streak of positive US payroll reports. Thirty-three thousand jobs were lost in September as a result of the storms, though the unemployment rate dipped to 4.2% due to a temporarily smaller labour force. Average hourly earnings rose to an annual rate of 2.9%, but economists warn that storm-related distortions are likely partially responsible for the rise. It is likely to be another month or so before the storms’ impacts work their way through the data. An unexpected positive effect of the hurricanes was a spike in September auto sales as consumers replaced vehicles damaged in the storms.

Declaration of independence expected from Catalonia
Catalonia, the wealthy Spanish region that is home to Barcelona, is expected to declare independence from Spain next week. The move comes in the wake of a crackdown by the Spanish central government on 1 October intended to suppress an independence referendum. Ninety percent of the ballots cast were for independence, with those opposed largely boycotting the vote. Analysts expect next week’s declaration to be largely symbolic, and Catalan leaders are likely to accept a devolution of powers from Madrid, particularly on fiscal matters, rather than pushing for a complete break. Catalonia pays roughly €10 billion more to the Spanish central government than it receives in state services.

Global economy continues expansion
Figures from the United States, Europe and China released this week all showed continued solid economic growth. September figures for the US manufacturing and services sectors both showed their strongest readings in more than a decade, but the US data may have been somewhat distorted by the recent hurricanes. The Institute for Supply Management manufacturing index rose to 60.8, the highest level since September 2004, while the nonmanufacturing reading came in at 59.8, a level not seen since August 2005. European data were similarly robust, and China also showed continued upward momentum.

Trump reportedly narrows the Fed chair field
Bloomberg News reported this week that aides to US president Donald Trump have narrowed the list of candidates for chair of the US Federal Reserve to four, or perhaps five, people. Trump has reportedly spoken with Fed chair Janet Yellen about re-upping, though she is not expected to receive reappointment, according to the report. Sitting Fed governor Jerome Powell, former governor Kevin Warsh and National Economic Council director Gary Cohn have all reportedly spoken with the president about the position, while Stanford University economist John Taylor has apparently not been interviewed but is said to be under consideration. All are known quantities to the markets, with Warsh and Taylor seen as the most hawkish of the group.

Iran nuclear deal expected to be decertified 
In a move that will likely draw criticism from European allies, President Trump is expected next week to decertify that the Iran nuclear deal — designed to restrain Iran’s nuclear ambitions — is in the security interests of the US. Presently, the president must certify the agreement every 90 days. If the president withholds certification, Congress then has 60 days to decide whether to reimpose sanctions on Iran. It is possible that the pact will ultimately hold together if Congress does not apply sanctions.

Puerto Rico’s bonds gyrate after talk of restructuring
An offhanded comment from President Trump that the $73-billion debt of Puerto Rico may get wiped out sent the island’s general obligation bonds skidding in price this week. Trading near 44 cents on the dollar before the comments, the bonds fell to around 30 cents before stabilizing, according to the Wall Street Journal. The White House later indicated that it does not intend to get involved in Puerto Rico’s restructuring.

First steps toward US tax reform underway
The US House of Representatives took the first step toward passing a tax overhaul by approving a fiscal- year 2018 budget blueprint. Congress must pass a budget before a tax bill is allowed, under Senate budget reconciliation procedures, to pass in that body with only 51 votes, rather than the 60 needed to end a filibuster. Passage of the House measure ups the odds that tax reform could be enacted early in 2018.

All the best and have a great week

Stuart

CEO

Farringdon Group

+60 3 2026 0286

Savers are being thwarted from cashing in their “final salary”-style pensions because financial advisers are refusing to work with them over fears of compensation claims.

Millions of people with final salary pensions, where income is based on salary and length of service, have the right to move their savings into other pension arrangements.

Thousands have chosen to do this because, while the schemes offer guaranteed, inflation-linked income paid by their former employers, they do not allow lump sum withdrawals and are less tax efficient on death. The terms that savers are offered are often very generous.

It is not unusual to be offered a “cash equivalent transfer value” of 40 or 45 times the projected annual income that a final salary pension would pay. So £6,000 of annual income could become £250,000 once moved into a personal pension.

Under rules set down by the City watchdog, financial advice must be sought before the pension can be moved if the transfer value is £30,000 or more. Charges vary, but are typically thousands of pounds.

However, savers are finding that firms are wary of advising them if they suspect they will not be able to recommend a move. At the same time, the path is blocked by personal pension providers that will refuse to accept a transfer from a final salary scheme without a “positive recommendation”.

Many cite the “pension review” of the Eighties and Nineties, which led to billions of pounds being paid in compensation after advisers were judged to have wrongly recommended people to give up company schemes for personal pensions.

As a result, dozens of people are being prevented from taking control of their money. Transfer values are unusually high at the moment and there are fears that the delay in finding advisers and firms willing to help will mean savers lose out, we can help !

Members of final salary schemes can receive a transfer value free of charge once a year. But the offers are only guaranteed for three months, meaning that savers have to pay for new valuations if they can’t arrange a transfer quickly enough.

We can assist anyone to get a valuation and work out the best option for your future, there is a number of calculations we can put together along with a report, peace of mind and accountability

Please email me at syeomans@farringdongroup.com

All the best

Stuart

CEO

Farringdon Group

+60 3 2026 0286

Courtesy of Daily Telegraph

As things stand today, there has never been a better time to consider cashing in a final salary pension AKA DB Scheme.

This is down to the fact that transfer values (the transfer offers on the table from employers) are at record highs.

Some schemes are offering transfer values of 40 times the annual pension, so £800,000 today for an inflation-linked pension of £20,000 a year for life. Offers on the negotiating table are much more generous compared to previous years. As a rule of thumb, prior to the pension freedoms transfer values were typically around 20 times

Transfer values have risen so dramatically because yields from bonds – in which final salary and defined benefit pensions are mainly invested – have fallen to record lows.

Low bond yields increase the cost to pension schemes as they need larger funds to produce the same income, which is why they are keen to reduce their liabilities and get pension savers with financial salary pensions off their books.

For those who have other assets to help generate retirement income, transferring can work as a means of passing the pension on to younger generations of the family.

In the case of defined benefit schemes, the full benefits stop when your spouse dies. If you both die early – it is simply a case of tough luck. Moreover, if you are widowed or divorced the pension will end on your death, with no benefits paid to children or grandchildren.

By transferring out, your pension pot can be passed on to whomever you wish. For those who are seeking to leave a legacy to their family, then by transferring out and into a personal pension plan they can leave the whole fund to them on their death.

In addition, thanks to new rules brought in a couple of years ago, transferring may prove worthwhile for inheritance tax planning purposes. Heirs now just pay income tax at their marginal rate when the money is withdrawn – and that only applies when the person from whom they are inheriting the money was over the age of 75.

For pensions inherited on deaths before the age of 75 there is no tax to pay. Therefore, for those in the position of being able to draw on other assets, the pension pot should be the last thing to touch.

A pension valuation is free and you may be very pleasantly surprised at how much its worth. These high transfer valuations are not going to last however, with interest rates set to rise in the next 6 months now is the time to strike.

Please don’t hesitate to contact me by phone on +60 3 2026 0286 or by email syeomans@farringdongroup.com if you’d like to consider getting a free valuation of your UK pension

All the best and have a great week

Stuart

CEO

Farringdon Group

+60 3 2026 0286