The currency blog

QROPS Update: The Effects of the Finance Act 2012

by Mike Bear (Scottsdale Overseas)

The publishing of the UK budget on March 22nd 2012 has answered many of the questions raised by the issuance of the draft paper on December 6th 2011. As had been expected, all of HMRC’s proposals from that consultation paper have now been ratified by this new legislation. The new conditions which are to be met post April 6th, 2012 are namely:

• Equal tax treatment of residents and non-residents alike.
• Any distributions from the scheme must be reported for 10 years following the date of transfer.
• Clarification that the pension commencement lump sum (PCLS) withdrawal is limited to a maximum of 30% of the members funds with the residual amount used to provide a life time income.

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We celebrated Easter in the office with a fund raising Easter Egg Raffle, and we also held a sweep for the Grand National. Both of these along with the usual dress down Friday has meant we had a fantastic fund raising couple of months, raising an impressive £497.85 - thank you to everyone who took part and donated!

This has pushed the co-operative wall total up to a mighty £11455 breaking the £11k barrier, and pushing us on towards the milestone £15k.

So which was your favourite charity this time?

Oxfam - in support of Jarrad Hubble’s London Marathon entry - £239.21
Great North Air Ambulance - £145.92
Daneford Trust - £112.72

Jarrad Hubble’s fantastic marathon run in support of Oxfam came out the clear winner with the majority of your donations. Jarrad ran the marathon in an impressive 4 hours and 7 minutes, congratulations Jarrad.

During May and June we will be supporting:

The British Heart Foundation
Touraid
Chickenshed

Thank you all for reading!

Fears in Europe have escalated a notch amid growing concern on both economic data and political cohesion.  This morning S&P have taken a negative rating action on 16 Spanish banks, in addition press reports out of Germany suggest that a Merkel-Hollande alliance will not be as straightforward as the Merkozy alliance.  At the moment the Euro is holding up fairly well as the market has been selling the USD on sentiment that the Federal Reserve will ease further, however the underlying negative tone will be a concern to the markets.

Later this week the ECB are expected to leave interest rates on hold, however Mario Draghi will face tough questions in the press conference on the strategy for Europe amid growing concerns for a growth compact.

Us jobs data will be a main data point to watch this week.  Friday’s non-farm payroll report will form important sentiment for the pace of the US recovery after last month’s disappointing number which followed a good run of jobs data.  The number is expected to be a good number and the feedback on this data will be a key factor for the Feds future strategy-a bad number and we can expect more easing.

In the UK, attention will focus on the PMI data tomorrow and Thursday which will offer a snippet of growth feedback following last week’s preliminary Q1 GDP which came in negative. Again if data proves negative it could trip the Bank of England to pump more QE through the system- possibly at the May MPC meeting.  Elsewhere we have an expected rate cut from the Reserve Bank of Australia tomorrow which could weigh on the AUD.

Sterling has been the star performer this week, driven higher by lower than expected jobless claims, an uptick in inflation, better than forecast retail sales this morning and Bank of England minutes that showed the MPC voted 9-0 in favour of keeping QE on hold for now. Aside from the positive data which naturally push the Pound up, the inflation figure and the Bank of England minutes are important because the forecast was for prices to fall gradually back towards the Banks target. The figure was not altogether unexpected, given the recent surge in oil prices but given the MPC have been adamant that inflation would continue to fall, rising prices may mean the bank begins to think about symbolic rate rises in the coming months and it is this that is reinforcing the move higher is the Pound over the last few days.

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Markets were dealt a surprise yesterday as the Consumer Price Index (CPI) rose in the UK to 3.5% up from 3.4% in February according to the Office for National Statistics. The ONS blamed higher food prices specifically soft drinks, bread, cereal, meat, fruit and vegetables coupled with rises in clothing & footwear. However there was some good news as utility bills were lower than one year ago following energy companies reducing tariffs in February last year. All eyes will know be on the Bank of England as this latest rise could reduce the likelihood of additional Quantitative Easing in next months MPC meeting but with stuttering growth the Bank of England may have no choice. 

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Italian borrowing costs soared yesterday following new concerns about their ability to reduce its high levels of debt. In the latest auction the Italian government paid an interest rate of 3.89% from 2.76% last month and this has been against the recent trends but investors are becoming increasingly sceptical over Italy’s and Spain’s ability to reach deficit targets. As a result newly elected governments in both countries have announced austerity measures to reach strict debt reduction targets.

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