In this month’s market update we bring you the latest in global news. On the Brexit front we look at whether or not the UK will leave the EU with or without a deal, votes of no confidence to an assertion of confidence, and the many amendments raised by MPs in the Commons. In Davos, we saw world leaders gather to look at some of the best and worst challenges facing the globe, and we await news from Washington on the now resumed trade talks between China and the US. Read the article.
After over two years in the pipeline, the government’s ‘cold-calling ban’ came into effect at last on 9 January this year. It’s been welcomed by the regulators and will come as a relief to FCA-authorised firms and consumers alike, particularly those who have been victims of pensions scams... Read the full article.
On 15 January we witnessed Theresa May suffer the worst parliamentary defeat for a sitting government in history. As the crowds gathered and the public wrung their hands waiting to see whether the parliament could come to agreement on a withdrawal deal, we were presented with the news that MPs had voted to reject the deal by 432 to 202. Whilst the result was not a surprise, businesses and the public are increasingly concerned with D-Day now so close.
On 16 January, Jeremy Corbyn got his wish of a vote by MPs on whether they had confidence in the government to carry out their duties and fulfil their service to their public. Unfortunately for Mr Corbyn, the motion of no confidence was rejected by MPs by a small margin of 325 to 306. Luckily Mrs May was able to rely on her ‘confidence and supply’ arrangement with the DUP who gave her the backing needed to retain government.
Theresa May was challenged to come up with a “Plan B” which she briefly discussed in the House of Commons on Monday 21 January. Following this, MPs were asked to vote on a number of ‘proposed amendments’ on 29 January. All but two amendments were rejected. The two that were passed were The Spelman Amendment asking Parliament to “reject the United Kingdom leaving the European Union without a Withdrawal Agreement” and The Brady Amendment which would “require the backstop to be replaced with alternative arrangements to avoid a hard border”. It is important to note that the government is not bound by these amendments, but they certainly increase pressure. Theresa May must now return to Brussels and fight for the amendments that have been voted for.
The markets and the pound continue to react to the ongoing debates around Brexit and whether or not a deal can be agreed. The FTSE All Share as well as Pound Sterling climbed throughout January, but are expected to react sharply on any breakthroughs.
FTSE All Share. Source: Yahoo Finance (November – February 2019)
GBP/USD. Source Yahoo Finance (November – February 2019)
The outcome of Brexit is not just a concern for residents and business leaders at home, but also some of the other key economies in Europe. Countries such as Germany, France and Italy are anxiously waiting to see what the result might be. The German economy is known to be struggling having grown 1.5 per cent last year compared to 2.2 per cent in 2017. The German PMI fell to a 50-month low of 49.9 (IHS Markit’s flash composite Purchasing Manager’s Index (PMI)) indicating a contraction of the manufacturing sector, but this was compensated by the Services sector which grew more than expected in January.
Elsewhere we continue to see tensions between the US and China rise, after a hope that things had started to improve. Trade talks resumed in Washington on 30 January. It had been reported that the US had rejected China’s offer of new, in-person, lower level talks as they felt some of the basic US demands had not even been considered. The world is watching intently to see whether at least a short term deal can be agreed. Both parties recognise that more discussions and collaboration will be required in the long term, but the 1 March deadline is getting ever closer.
Stock markets will of course remain reactive to news and updates on both Brexit and the US/China trade war and due to the fast paced nature of the news this cannot be avoided. We have seen both the IA North America and IA China and Greater China take dips in the last few weeks, but maintain their long term potential. The US maintains a greater performance over the last 6-12-month period.
IA North America. Source: FE Trustnet.
IA China/ Greater China. Source: FE Trustnet.
On 22 January world leaders and influencers met for the World Economic Forum in Davos, Switzerland. While many subjects were discussed, Brexit was certainly a hot topic for the conference. Theresa May elected to stay in London to progress Brexit negotiations and meet with business leaders, which left Chancellor Philip Hammond to face the masses. Mr Hammond was due to appear on the EU/Brexit panel but decided not to attend, trying instead to cover more meetings with business leaders. Leo Varadkar expressed concerns about disruption in Ireland, and said the Brexit process was now a part of preserving the peace. Liam Fox, International Trade Secretary emphasised the importance of securing a deal saying, “There is no doubt that leaving with a deal and minimising disruption both to the UK and our EU trading partners is in our best interest”.
We will have to watch carefully to see what unravels throughout February and see whether or not the UK is able to secure a deal and how this will affect both the UK and global markets.
After over two years in the pipeline, the government’s cold-calling ban came into effect at last on 9 January this year. It’s been welcomed by the regulators and will come as a relief to FCA-authorised firms and consumers alike, particularly those who have been victims of pensions scams.
The new ban makes it illegal to cold-call in relation to pensions, unless the caller is authorised by the FCA, or is the trustee or manager of an occupational or personal pension scheme. It’s not considered ‘cold’ calling if the caller has obtained consent for the calls, or if they have an existing relationship with the customer.
The increase in scams can be traced back to April 2015 with the introduction of Pension Freedoms, which created significant opportunities for cold-calling and scamming within the pension sector. Much of the activity has been aimed at vulnerable customers who have been exploited due to a lack of knowledge of financial matters, a lack of understanding of health conditions, or an inability to withstand financial or emotional shocks; all of this has led to significant harm for many consumers. The scale of the problem can be seen from some statistics:
The FCA and The Pensions Regulator (TPR) identified ‘cold’ calling as the main method of scamming and warned that the offer of a 'free pension review' was a common tactic used by fraudsters. The government pledged to reduce the number of consumer requests to transfer to illegitimate schemes, and to stamp out cold-calling as the main mechanism for persuading consumers to take up pension investments and services, but as well as unsolicited calls, the ban also covers emails and text messages about pensions. It’s been enforced by the Information Commissioner's Office (ICO), which has the power to issue fines of up to £500,000 for breaches.
The hope is that this ‘cold-calling ban’ will go some way towards protecting UK consumers from pension scammers, although it does not cover calls made from overseas. Advisers should remain wary of unregulated introducers. The ban on cold-calling will reduce the reach of unregulated introducer business activity, but they can continue to attract customers through newspaper and online advertisements. An FCA-authorised firm which accepts business from an introducer must meet the FCA’s regulatory requirements, as outlined in the FCA handbook. If clients are given unsuitable advice by an introducer, the authorised firm may be held responsible for this and may be subject to regulatory action.
During the life cycle of your client’s Novia SIPP, we will provide your client with information from TPR, publishing awareness of pension scams and the availability of the government-backed Pension Wise service that has been driven by the regulators to promote consumer awareness.