3Ms – September 2021

  • By Darren Scoon
  • 30 Sep 2021

Monthly Chatter

Carol and I (and kids- can’t go anywhere without them!) enjoyed a short break in Spain last week which was wonderful and just what we all needed having been couped up for so long.  The stressful and expensive part of the trip was all of the testing, never had to fill in so many forms, so it’s great to see that the rules have been changed, albeit Scotland is taking a slightly more cautious approach.  We all felt very safe travelling and are hoping that this is just the start and travelling will become the norm once more.

While lying in the Sun (29 degrees in September), I’ve been pondering life and discussing/planning all sorts with Carol.   Should we get our own place out here, should we move house, should we…. should we…. and I expect I’m no different to everyone else.

My own plans needed dusted off and reset, so I’m keen to ensure that you are clear on what your future holds, what plans you have and where you might fancy travelling to, so when we next meet make sure we focus on your Financial Planning Statement, which details your goals and objectives.

Talking of meeting’s I’ve been back doing face to face meetings for a while, I’m all zoomed out for the moment but do think that technology holds a place in the future of financial planning and would love to hear what you think, some of you may prefer the technological approach as you can switch me off!

This week has had me on a road trip south of the border to see some clients for the first time in a while it was great to see them and the trip made all the more interesting by a new game of ‘hunt for fuel’ it’s remarkable just how some people behave and how different areas of the country actually are!

I’m not home yet and will need to fill up at some stage otherwise my trip might be unexpectedly extended!

With fuel prices increasing, petrol shortages, shelves going empty the media are saying we are potentially facing a winter of discontent, the headlines are alarming but as usual over the top reporting is doing more harm than good – when will responsible journalism return?

There is a driver shortage and the cost of gas has increased significantly and these will have a knock on effect but panic buying isn’t the answer.  I find it all very interesting the same issues are being faced around Europe but reported very differently.

The stock market has faced considerable volatility in the last month but at the time of writing it’s only 80 points down on this time last month so it’s really all relative, It’s amazing what a week’s break does for you as I’d normally be jumping up and down! Anyhow that’s the holidays over for a month or so, although we’re already discussing a winter break, so back to sunny Scotland.

Lastly and on a personal note I’d like to say thanks to all of you, my clients, for your ongoing support. it is very much appreciated. And I should say that if you don’t work in the industry the company formerly known as Standard Life has rebranded as Abrdn (pronounced as Aberdeen) so you may receive a communication about this.

Stay safe.



Market Movements

The U.K. economy emerged from the winter lockdown more strongly than previously estimated, but the recovery is already running into trouble

This has been reflected in the volatile markets this month.

Gross domestic product (GDP) rose rose 5.5% in the second quarter instead of the 4.8% previously estimated, Office for National Statistics figures published Thursday show. The increase, which reflected the reopening of stores and the hospitality sector, left the economy 3.3% smaller than it was before the pandemic struck.

Government spending, exports and business investment were all stronger than previously estimated by the ONS.

Hopes that the shortfall might be made up this year are fading however, with consumers and businesses facing the twin headwinds of accelerating inflation and supply chain problems. Bank of England (BOE) Governor Andrew Bailey on Wednesday said that output is unlikely to recover its pre-pandemic level until early next year, later than officials predicted in August.

The upward revisions on Thursday weren’t enough to lift the economy back to its pre-Covid level. If the economy follows the path expected by the BOE for the remainder of the year, output would still be 1.3% below levels before the crisis started.

The BOE last week sharply downgraded its third-quarter growth forecast to 2.1% after firms faced shortages of workers and materials and a resurgence of coronavirus cases made consumers more reticent about spending. Economists say its 2% forecast for the final three months of 2021 is looking increasingly optimistic.

Separate ONS figures showed that consumers saved 11.7% of their income in the second quarter. The ratio was down from a revised 18.4% in the first quarter, when the country was under a third national lockdown to contain the coronavirus. That’s above levels of less than 7% prior to the pandemic.

The current account deficit, the gap between money coming into the U.K. and the flows leaving, narrowed unexpectedly to 8.6 billion pounds ($11.6 billion). That was about half the rate expected and 1.5% of GDP. Trade in goods and services swung to a small surplus, offsetting a wider deficit on investment income.

There were upward revisions to government spending that reflected better data on health. Revisions to exports and imports meant that trade contributed to growth in the second quarter instead of acting as a drag.

Industrial production, construction and services were also all stronger than previously estimated.

So if the supply chain problems can be resolved then the UK is in reasonable shape, the issue is the problems we have with supply chains can’t be resolved quickly which is why the message is downbeat and already we’re hearing talk of a winter of discontent.

Elsewhere U.S. stock index futures jumped during early morning trading on Thursday, after tech stocks dipped again on Wednesday as investors digest the impact from higher rates.

Futures contracts tied to the Dow Jones Industrial Average gained 245 points. S&P 500 futures and Nasdaq 100 futures both also traded in positive territory.

The Dow and S&P 500 inched higher during regular trading. The 30-stock Dow advanced about 90 points for its fifth positive session in the last six, while the S&P 500 gained 0.16%, breaking a 2-day losing streak.

The Nasdaq Composite, meanwhile, declined 0.24% for its fourth straight negative session. The technology sector declined again on Wednesday and is now down 4% for the week, making it the worst-performing S&P group.

The tech decline came as the 10-year Treasury yield hit a high of 1.56% on Wednesday, after rising to 1.567% on Tuesday. The move higher is pressuring tech stocks since it makes promised future cash flows look less attractive.

Investors are also monitoring the latest headlines out of Washington. On Wednesday the House passed a bill that would suspend the U.S. debt ceiling after Treasury Secretary Janet Yellen told House Speaker Nancy Pelosi on Tuesday that Congress had until Oct. 18 to raise or suspend the debt ceiling.

However, Republicans in the Senate have said they will reject the legislation.

“While the political dynamics remain uneven, we think that US debt ceiling negotiations will succeed in time and a US government shutdown can be avoided,” UBS said Tuesday evening in a note to clients. “Overall, our base case still envisions solid economic growth and a gradual tightening of monetary conditions,” the firm added. Based on these projections, UBS advises investors to favor equities over bonds.

All of the major averages are firmly in the red for the week. The Dow is on track for its fourth negative week in the last five, while the S&P and Nasdaq Composite are on track for their worst weeks since February.

InChina heavy- handed measures by local governments to meet Beijing’s energy consumption and carbon emission targets for fulfilling its climate commitments have drawn the ire of international manufacturers and caused costs to spike in many industries.

At least 20 of China’s 31 provincial-level jurisdictions are rationing electricity to play catch-up, after they were unable to meet Beijing’s annual dual targets earlier in the year. Nine provinces have been criticised by the central government for their failure.

Prices of coal, which have risen around 40 per cent in the last month, from around 780 yuan (US$121) a tonne in mid-August to around 1,100 yuan a tonne in recent weeks, have adversely impacted power producers, who are constrained from raising electricity tariffs.


Recent uncoordinated actions by local authorities are jeopardising our member companies’ ability to operate with full compliance on environment and safety in China, [and] risk reducing China’s attractiveness for further investments and hurting China’s economy,” the Association of International Chemical Manufacturers, which counts nearly 70 members, said in a statement on its website.

A spokesperson declined to elaborate on the impact on its operations but said it was “actively preparing for relevant measures to ensure safe operation and stable product supply”.

While energy intensive sectors such as steel, cement, aluminium and chemicals have been hit the most by the power cuts, light industries and some residential customers have also been affected to a small extent in some regions.

The moves which as mentioned are being made to help China reach its energy consumption and carbon emissions targets (which are still very high) is seeing an increase the cost of goods being produced so the rest of the world watches the situation with interest.

In Europe it’s been dominated by the retirement of Merkel and the subsequent German election which has failed to produce a new majority party.  It’s expected that it will take a few months of negotiations between the various parties before a new government is formed so a vacuum will exist for a while, I expect Macron will be opportunistic and try to lead the EU from the front so October/November could be interesting.


Monthly Insights 

You may have missed it with everything that you have going on but the chancellor announced earlier this month that the triple lock on pensions would be suspended, so I thought it was worthwhile explaining what the triple lock was and why it’s been suspended and how it might impact you.

What is the triple lock and how does it work?

At present, the state pension is supposed to increase each year in line with whichever of the following three things is highest:

  • inflation, as measured by the Consumer Price Index (CPI)
  • the average wage increase
  • or 2.5%

This is known as the triple lock.

It was introduced by the Conservative/Liberal Democrat coalition government in 2010.

In its 2019 election manifesto, the Conservative Party said it would keep the triple lock in place for the duration of this Parliament.

Men and women are currently entitled to the state pension at the age of 66 but this is scheduled to rise.

Why is it being suspended?

During the Covid pandemic, many people were earning less than usual because they were placed on furlough.

Now, as people come off furlough and return to full pay, this has been recorded as a large rise in average earnings – an estimated 8% from May to July 2021.

Under the rules of the triple lock, this would mean that state pensions would need to rise by a similar amount. It is an unusual and unique situation as well as an awkward dilemma for the government. It is trying not only to pay back debts built up over the pandemic, but also to find money for its social care plan.

What has the government announced?

Work and Pensions Secretary Therese Coffey has said the triple lock is to be suspended for 2022-2023. Instead, the state pension will be determined by either the inflation rate or 2.5%.

She said the triple lock would then be restored for the remainder of this Parliament, which ends in 2024.

What is the current state pension worth?

  • The full, new flat-rate state pension (for those who reached state pension age after April 2016) is £179.60 a week
  • The full, old basic state pension (for those who reached state pension age before April 2016) is £137.60 a week. They may also get a Pension Credit top-up.

Could the triple lock disappear for good?

Charities representing the elderly are worried the suspension may turn out to be permanent. They argue the state pension is relatively little to live on, and low alongside international comparisons.

For some pensioners, particularly women, it may be their only source of income if they had little or no opportunity to build up a private pension.

The triple lock guarantee was introduced to ensure pensioners did not see any rise in their state pension being overtaken by the rising cost of living, nor that the working population would be see a much bigger income rise than them each year.

However, it has proved to be a very expensive policy.

Why does this matter?

The state pension for most of us will provide some level of income in our retirement so we need to be aware of anything that impacts it, as we will have to make provision from personal wealth to replace any shortfall.

The best starting point is to determine what your current entitlement so if you haven’t already done so then log in to the government website and produce an up to date State Pension Forecast. https://www.gov.uk/check-state-pension , once you’ve done this share the details with your adviser and start the discussion.