Our Weekly Newsletter

Across Instinctif Partners’ Financial Services team, we are always keeping an eye on the key developments taking place across the sector to evaluate their impact on the many businesses we work with. Here we share our picks of the week’s most interesting news, and our expert views.

News you can use

Bank deputy governor warns against negative interest rates

Sir Dave Ramsden, a Bank of England deputy governor, has spoken out against setting negative interest rates that would bring the cost of borrowing below zero. Speaking to the Society of Professional Economists, Ramsden warned that the move “would be less effective as a tool to stimulate the economy”. While the Bank has already cut rates to 0.1% in response to the Covid-19 pandemic, pressure is mounting from some policymakers for negative rates; given the BoE charges for any deposits it holds on behalf of the banks, this would encourage banks to lend the money to businesses rather than deposit it. (From BBC News, 28 September 2020)

Investment in UK equities hits record low

According to the Investment Association’s annual survey, investment in UK equities has fallen to just 29% of equity allocation. This is a record low, falling below 30% for the first time, with the proportion also being 18% less than it was a decade ago. The IA comments that this decline has been caused by multiple factors, including Brexit’s destabilising effect on the economic market and that the total returns from the FTSE have been weaker compared to global capital markets. (From FT Adviser, 28 September 2020)

Firms face mounting scrutiny over pandemic pension suspensions 

The Pensions Regulator is scrutinising companies’ pension schemes for suspected abuse of measures which allowed employers facing coronavirus-induced financial pressures to suspend payments into workers’ retirement funds. The investigations have been sparked by growing concerns that firms seeking to strengthen their cash flow to help weather the financial impact of the pandemic and resulting lockdown measures have reduced or stopped pension contributions altogether to reduce costs even when they could still meet these obligations. (From the FT, 27 September 2020)

Concerns over city centre businesses mount as workers urged to stay at home

The number of UK workers returning to their desks gathered pace in September, with 45% of office staff heading back to work, compared with 37% in August. The recovery in attendance at offices is likely being driven by a reduction in fears over contracting coronavirus among workers. Higher office footfall comes as the Government has urged workers to work from home where they can to help curb a sudden rise in infections. Fears over the future viability of city centre businesses are mounting as workers resume staying at home – these businesses rely heavily on the income office workers provide. (From The Guardian, 30 September 2020)

DB transfers drop 28% over last year

Defined benefit to defined contribution transfers fell 28% over the last year, latest FCA data reveals. The fall may have been driven by growing concerns over having to fund longer retirements among consumers. Defined benefit pensions often provide greater financial security in retirement as they give people regular, pre-defined monthly payments in later life calculated using workers’ final salaries, helping retirees to maintain living standards throughout retirement. However, the data also show more defined contribution pensions are being fully withdrawn, and that savers who use them for income have taken an increasingly large amount, indicating people are using pensions to make private investments or for immediate consumption of big ticket purchases. (From Money Marketing, 29 September 2020)