Since the financial crisis of 2007/09, economic growth in the UK and the rest of the EU has been patchy but the US has generally been posting steady if unspectacular growth figures. Were it not for dips in Q1 2011 and Q1 2014, it would be entering its 26th quarter of real growth since the trough of the downturn in Q2 2009 to the end or 2015 [1]. This is on a par with the expansion in the US economy in the run-up to the financial crisis, which begs the question: how long can this growth last ? and what would be the impact when the recovery falters ?

An uncomfortable precedent if it falters is the US recession of 1937/38. As at present, the US was recovering from a balance sheet driven recession, though the depression of 1929/33 was much worse the financial criis of 2007/09, with GDP falling 45% in nominal terms between 1929 and 1933. After that fall, GDP recovered strongly, growing by 63% in nominal terms between 1933 and 1937, partly on the back of President Franklin D. Roosevelt’s...

In recent weeks, ads for a SERPS misselling claims company have popped up frequently on my Facebook page [1]. Not content with mortgage endowment and PPI misselling, ambulance chasers are also looking at contacting-out sales as a source of claims and fee income. Just how serious a threat is this ?

At the heart of the misselling claims are appropriate personal pensions (APPs) used to contract out of SERPS [2]. The government paid National Insurance rebates into the APP but in return, a deduction would be made from SERPS benefits in respect of the period contracted out. When contracting out through APPs was introduced in 1988, the rebate did not vary by age, whereas the value of SERPS benefits foregone increases with age, so contracting out was generally expected to be beneficial for younger people below a “pivotal age”. Although rebates were then changed to be age related, the expectation, based on assumptions for investment returns and life expectancy, remained that...

This is my second revision to this blog. I first posted this blog after the Scottish referendum; and then updated it just before the general election. Back then I was concerned about the possibility of a minority Conservative government backed by UKIP calling a referedum on EU membership. I was wrong about the Conservatives being in a minority, but we are now looking at an in/out referendum on EU membership in 2017 and with it the possibility of the UK leaving the EU, the so called Brexit.

This vote would be a much closer contest than Scottish independence (which in the end was unexpectedly tight). Currently most opinion polls have a majority in favour of staying but some polls have a majority in favour of leaving and the polls have up to 20% of voters uncommitted [1]. Support for staying in may improve if David Cameron secures concessions as part of a renegotiation of the UK’s membership, while most businesses will actively lobby...

My previous post touched on how asset managers could be exposed to 3rd party misselling under the FSA’s PS07/11 on provider / distributor responsibilities [1] which places an onus on product providers to ensure their products are suitable for target markets and that marketing literature and other sales support is sufficient for customers and their advisers to understand risks involved. I think PS07/11 could now become a critical issue for life insurers as it may expose them to misselling liabilities in respect of enhanced transfers values (ETVs).

By way of background, ETV exercises were often undertaken by employers to reduce pension scheme liabilities or reduce their exposure to pension scheme risks. They typically involved deferred members who had left employment and were no longer accruing benefits but had still to reach retirement age. These were given incentives to transfer their benefits to a personal pension, thereby extinguishing the scheme’s liability. The...