Gower pension Schemes - Member Briefing December 2024

2024 The good, and the not so good

Adam Sullivan, Senior Financial Adviser at Gower Financial Services, reflects on what has generally been a successful year for financial markets, but notes that with each positive there is a cautionary tale for pension scheme members to be mindful of as we move into the New Year. 

It would be a mastery of understatement to say there have been some political & economic developments over the 2^nd half of 2024, some were of the more predictable nature, some less so. As Good news/Bad news cycles pass, they can arguably be distilled into a series of contrasting headlines that we can all identify with: -

Good news – Central Bank (Fed, BOE, ECB) Interest rate cutting cycle continues                                    

Not so good news – At a much slower pace than hoped                                                                  

Good news – Inflation pressures easing                                                                                                                 

Not so good news – Cost of living pressures remains a significant challenge                      

Good news – Stock markets improve significantly through the 2^nd half of the year.                                            

Not so good news – Maybe at too hot apace in the face of much political uncertainty?  

Good news – Ceasefire as Conflict in Gaza reaches a degree of resolution                                                                   

Not so good news – Many tragic conflicts remain, with their number only growing             

Good news - Bitcoin surpasses U$D100,000                                                                                                     

Not so good news – Bitcoin surpasses U$D100,000

The rate cutting cycle continues across all major Central banks providing continued motivation for many Stock markets, not least in the US where performance of the so called ‘magnificent seven’ stocks (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta & Tesla) have lived up to this label, driving US markets to ever higher levels.

As ever, the Politics matter, as the so called ‘Trump Trade’ has fuelled momentum further, whilst also creating uncertainty. Whilst not yet President, Presidential power is being flexed. Examples are numerous whether they be Tariffs, Excessive borrowing and the impact this may have on Bond markets given the more generous fiscal loosening policies that President elect Trump was known for during his 1^st term in office.

There is some irony around the Crypto space as investors speculate that a Trump administration will bring Cryptocurrencies within mainstream financial markets. Along-side such hope sits continued positivity around AI applications as their use is adopted ever more broadly alongside which sits anticipation of Quantum Computing’s high-level problem solving abilities.

Concerns are however rising that the combined ability of these developments pose many a security issue not least given their potential to break the cryptographic keys used in securing such assets. Hence these developments have the potential to produce both good and bad outcomes, ‘let the buyer beware’’.     

The recent events in South Korea and the developing situations in Germany, France, and indeed Syria, illustrate that none are immune to gyrating political and economic uncertainty, and the conflicts and complexities that result.

Closer to home we can hopefully take some comfort from the more mundane political transition in the UK for the New Labour Government. Although the first Labour budget in 14 years was far from mundane as we await the full impact on both business and personal affairs in the months ahead.

One thing does seem clear for those with UK interests, the use of Pensions as part of IHT planning would appear to be over. From 2026/27 many will need to plan a little differently. Moreover, Gifting, Spending and the use of Annuity planning are likely to become more popular as a consequence of UK changes.

How, if at all, these changes impact Guernsey and the Channel Islands will be closely monitored by the team at Gower, although there have already been some adjustments to the Qualifying Recongnised Overseas Pensions Schemes (QROPS) framework, of which numerous Gower pension members have made use in the past.

Remaining with the Pensions theme, all pension scheme portfolios across which members build and invest their Pension and Retirement savings are outperforming their sector averages. Where members have adopted higher risk strategies, this conviction has been rewarded with both ‘Balanced’ and ‘Adventurous’ models, providing significant double-digit returns.

For those viewing planning through a more decumulation lens, or simply with a more conservative outlook or risk appetite, ‘Cautious’ modelling has exceeded both cash and UK Gilt returns. So overall, there is much to be positive about as we reflect and look ahead to the New Year.

As ever the team at Gower are available to discuss or review any financial planning aspect.  Wherever you are along your own retirement path I would urge all pension scheme members to undertake a forecasting exercise to map your planning (see Personal Financial Forecasting - Gower).  A forecasting exercise can prove invaluable in helping determine where your retire plan actually is in relation to your own expectations of retirement income, as opposed to where you think it is.

I close in wishing all pension scheme members an enjoyable New Year.