Election Deadlock

The general election has resulted in a hung parliament but, whilst it is yet another major surprise result, it is likely to represent little immediate change in either economic or political affairs for the UK.

In practice Mrs May has lost 12 conservative MPs and gained 10 DUP MPs, who have tended to vote with the conservatives on most issues in previous parliaments.

The prime minister has certainly suffered a loss of authority and, as financial markets hate uncertainty, it is no surprise that Sterling has initially fallen in value against both the Dollar and the Euro.  This has in turn produced gains for the FTSE 100 index.

When the dust has settled there may be some changes in emphasis on policy, or personnel, but for now it is business as usual.  We do not, therefore, see any need to make any change to our investment strategies.

Trevor Simms, Managing Director @ Birchwood Investment Management

The opinion of Trevor Simms on the re-opening of the M&G Property Fund

The opinion of Trevor Simms, Managing Director of Birchwood Investment Management, on the re-opening of the M&G Property Fund..

“ I am pleased to learn that the M&G Property fund has been able to re-open the fund as quickly as they have been able to and the fact that other managers have also been able to restore liquidity relatively painlessly gives us reassurance that the sector is in better heath than the initial position may have implied.

The initial reason to stop dealings in the fund was not a concern about the quality of the holdings or their longer term value but one of cash flow considerations.

Normally this kind of property fund retains approximately 12 -15% liquidity to ensure that it can deal with normal inflows and outflows of capital without having to sell a large property at short notice that would damage fund performance for those people remaining invested.  However, following the results of the Brexit referendum institutional investors who had larger exposure to Commercial Property than they would normally hold because they were using Commercial Property as a proxy for the lower yielding fixed interest investments they would traditionally use to generate income started reducing their property exposure to normal levels, and this led to a drain on the cash reserves of the property funds.  When all the major managers saw their liquidity fall below 5% they had to take some action and most decided to put a temporary halt to all dealings in the fund.

We were very pleased to see how quickly they have been able to restore the necessary level of liquidity to be able to restart dealings.  Standard Life were able to sell some properties above book value and the M&G fund only had to accept a reduction of 3% on valuations to restore their liquidity. This is very modest when compared with the equity market fluctuations following the Brexit referendum.

We are therefore happy to continue to hold the existing exposure to the sector as an important asset class diversification.”

 

 

Trevor Simms, Managing Director at Birchwood Investment Management

 

Half of pensioners bank on benefits to maintain lifestyle

Over half of pensioners rely on benefits, perks and subsidies to continue their pre-retirement quality of life, research reveals.

The study found that 51 per cent of pensioners would be forced to make significant changes to their lifestyles if this range of benefits, discounts and concessions were not available to them.

A third had said that they would not be able to afford dental treatment without pensioner subsidies, and three in 10 said that public transport would be unaffordable without OAP concessions.

As for their quality of life, one in four had said “days out would be out of the question” if pensioner discounts were not available, and around one in 10 said they would not be able to afford a TV licence.

Earlier this year, it was also revealed that one in seven pensioners retiring in 2016 would be entirely reliant on the state pension.

Retired households, on average, receive a total of £11,227 a year in state pension, including housing benefit and attendance allowance.

Pensioners also receive substantial subsidies in healthcare and travel, which the Office for National Statistics estimates to be worth around £6,274 each year.

Perks, such as cinema and concert concessions, are also estimated to be worth around £88 a month.

In light of the research, experts have advised people to save as much as possible, in order to maintain the quality of life they had come accustomed to when working full time.

For advice on pensions savings, please contact the expert team at Birchwood today.