The Expat Investment Society

• What is a trust
• How does it work
• Who can set up a trust
• Cost of setting one up
• British domicile law
• See working examples of a discounted gift trust

Trusts & How to Mitigate Inheritance Tax • What is a trust • How does it work • Who can set up a trust • Cost of setting one up • British domicile law • See working examples of a discounted gift tru...

One of the reputable companies we have been using.

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How To Make The Most Of Unused Inheritance Tax Allowance

The UK tax office has recently updated its rules for transferring any unused portion of basic and additional IHT thresholds when the first person in a marriage or civil partnership dies.

Find out more about the basic and additional IHT thresholds and see examples of how unused portions can be transferred to a surviving spouse or partner.



The Basic Tax-Free Threshold

The basic tax-free threshold available when a spouse or civil partner dies can be increased to as much as £650,000 ($843,933, €715,226) if none of the £325,000 threshold was used when the first of the couple died.

The basic threshold that is available to their estate is increased by the percentage of the threshold that was not used when the first partner died.



Example

Paul dies leaving legacies totaling £600,000. He leaves £130,000 to his children and the rest to his wife.

The available threshold at the time was £325,000.

The legacies to the children would use up 40% (£130,000 ÷ £325,000 x 100) of the threshold, leaving 60% unused.

When his wife dies, the threshold is still £325,000, so their available threshold would be increased by the unused percentage (60%) to £520,000.

If his wife’s estate isn’t worth more than £520,000 there’ll be no IHT to pay when she dies. If it’s worth more, IHT should be paid on anything above £520,000.



Transferring any unused basic threshold

The estate’s executors must claim to transfer the unused basic threshold when the husband, wife or civil partner dies.



Unused additional threshold

If someone owned their own home or a share of one, their estate may be entitled to an additional threshold.

The extra amount for 2017/18 is up to £100,000. The maximum available amount will go up yearly.

Any additional threshold that is not used when someone dies can be transferred to their husband, wife or civil partner’s estate when they die.

This can also be done if the first of the couple died before 6 April 2017, even though the additional threshold was not available at that time.

The additional threshold and any transferred additional threshold is available if the surviving husband, wife or civil partner:

Leaves a home to their direct descendants; or,

Includes the home in their estate.



Qualifying criteria

The home that the surviving husband, wife or civil partner leaves to their direct descendants does not have to be the same home that they lived in with their partner to either qualify for the additional threshold or to transfer it.

The surviving husband, wife or civil partner does not have to have previously owned the home with their late partner, or inherited it from them.

It can be any home as long as the surviving spouse or civil partner lived in it at some stage before they died and the home is included in their estate.

If the surviving husband, wife or civil partner sold or gave away their home on or after 8 July 2015 and they leave other assets to their direct descendants when they die, the additional threshold may still be available under the downsizing rules.

Couples who are not married or in a civil partnership, or who have divorced, will still be able to benefit from the additional threshold individually if they leave a home to their direct descendants. But they won’t be able to transfer any unused additional threshold to each other.



Pre-April 2017

Where the first of the couple died before 6 April 2017 their estate wouldn’t have used any of the additional threshold as it wasn’t available.

So, 100% of the additional threshold will be available for transfer unless their estate was worth more than £2m and the additional threshold is tapered away.

It’s the unused percentage of the additional threshold that’s transferred, not the unused amount.

This makes sure that if the maximum amount of additional threshold increases over time, the survivor’s estate will benefit from the increase.



Calculating additional threshold

You calculate the actual amount that is transferred to the surviving spouse or civil partner’s estate in two steps:

Step 1. Work out the percentage of additional threshold that wasn’t used when the first of the couple died.

You do this by dividing the unused amount of additional threshold by the total additional threshold that was available when the first of the couple died and multiplying the result by 100.

If the person died before 6 April 2017 the unused additional threshold and total available additional threshold are both deemed to be £100,000 so the unused percentage is 100%.

Step 2. Multiply the percentage of additional threshold that was unused when the first of the couple died by the maximum additional threshold available at the time of the survivor’s death.

This gives you the sum available to transfer.



Case Study

Philip died in 2015 and left his entire estate to his wife. This was before the additional threshold was available.

So, when he died, the additional threshold could not have been used. That means 100% is available to transfer to his wife’s estate.

His wife dies on 30 July 2019 and leaves all her estate, including a home worth £400,000, to her daughter.

Having died in the tax year 2019/20, the maximum available additional threshold is £150,000.

Her executor makes a claim to transfer the unused additional threshold from Philip’s estate.

So, the total available additional threshold for Philip’s wife’s estate will be £300,000 (£150,000 + (transfer of 100% x £150,000)).



Transferring any unused additional threshold

The estate’s personal representative will need to give details of the amount due and supporting information on the IHT return.

They will make a claim to transfer any unused additional threshold from the estate of a late husband, wife or civil partner.

They will also need to make a claim for any additional threshold as a result of downsizing selling or giving away of the home before the person died.

As the additional threshold and basic IHT threshold are not linked, the percentages transferred can be different.

This means that even if all of the basic IHT threshold was used when the first of the couple died, you can still transfer the unused additional threshold.

The percentage of transferred additional threshold will be limited to 100%.

This means that if an individual has had more than one spouse or civil partner and they make a claim to transfer the unused additional threshold from each one, the total transferred additional threshold can’t be more than 100% of the maximum available amount.



We know this tends to get complicated and it’s something that people do forget about or don’t tend to talk about, so we can help. I’m happy to arrange an introduction via call, Skype or face 2 face, just let me know and of course, as always, everything is private and confidential that is discussed.

All the best

Duncan

[email protected]







Source: International Adviser

Are You Returning ‘Home’ to the UK ?

Making the move back to the UK after spending time living abroad is not nearly as easy as one would think. There are a number of reasons why people decide to return ‘home’, most commonly; homesickness, missing family members etc.

Your decision to move home has likely took months to reach and moving home after spending an extended period of time living and working abroad can give way to a number of challenges, both emotional and difficult never mind the change of climate and way of life.

The process of repatriating can become a stressful experience. Think of it as being similar to when you started your expat adventure, just without the hassle spending hours in a bank, opening up a new account in a foreign country!

When considering repatriation, one must consider whether they are still a UK Resident or an Overseas Resident.

This list of Criteria is helpful in determining which category you fit in. This should be step one when considering moving back to the UK.

You are still considered a UK resident if you;

• Present in the UK for 183 days or more in a tax year; or
• There is at least one period of 91 consecutive days, at least 30 days of which fall in the tax year, when:
• you have a home in the UK in which you spend a sufficient amount of time (typically 30 days), and either you:
• have no overseas home, or
• have an overseas home in which you spend no more than a permitted amount of time (typically 30 days)
• Work full time (typically 35 hours per week) in the UK, as assessed over a period of 365 days with no significant break (typically 31 days of less than 3 hours work) (also consider relevant jobs)or
• The 30-day presence rules operate on each home separately and independently

You are now considered an overseas resident if you;

• Resident in the UK in all of the previous three tax years and present in the UK for fewer than 16 days in the current tax year; or
• Not resident in the UK in all of the previous three tax years and present in the UK for fewer than 46 days in the current tax year; or
• Work “full time overseas” (typically 35 hours), in the year of assessment and there are no significant breaks from overseas work (typically 31 days of less than 3 hours work), the number of days on which more than 3 hours are worked in the UK is less than 31 and the number of days spent in the UK is less than 91

Now it’s time to acknowledge what has changed since you left

A list of changes would include;

• Changes to State Pension
• Changes in personal tax allowances
• Changes to lifetime allowance
• Changes to inheritance tax
• The closing of capital gain loopholes

Regarding state pension,

After April 2017, people will have to work longer, needing to make 35 years’ worth of National Insurance (NI) contributions, rather than the current 30, to qualify for the full state pension.

Whether or not you will be awarded the UK State Pension is usually based on the UK qualifying years you have worked. You can however accrue qualifying years in the European Economic Area, Switzerland, or certain bilateral countries that have a social security agreement with the UK. We can assist by sending you a quick and easy 5 step guide to checking your NI contributions, just email me for details.

Regarding changes to personal tax allowance,

The amount of money you are allowed to earn before income tax becomes payable has increased to £11,000, up from £10,600. From 6th April 2017 it will rise again to £11,500.

Those who fall into the 40% tax rate bracket can now earn £43,000 a year, up slightly from £42,385 in 2015/16, before having to pay the higher-rate of income tax. This is set to rise further to £45,000 in April 2017 with the Government stating its commitment to raising it to £50,000 by 2020.

Regarding changes to lifetime allowance,

On the 6th April 2016 the standard pensions Lifetime Allowance (LTA) was reduced again, this time from £1.25 million to £1 million. Having peaked at £1.8m in 2010/11 anybody with an estimated pension portfolio approaching £700,000 or a projected retirement income of £35,000, must review their retirement plans now.

Those who do nothing risk being taxed at a rate of 55% for any excess (amount above the lifetime allowance) taken as a lump sum, or 25% for any excess taken as income (in addition to your marginal UK income tax rate). We can assist with a free pension review, please email me for more details.

Regarding changes to inheritance tax,

The idea of working your whole life and then having to pass a large slice over to the state can leave a bitter taste in many people’s mouths. However, with careful planning there are ways to minimise or even eradicate any such liability and ensure that your life’s wealth goes to the people you want it to.

Unfortunately, it is all too common to see forced property sales and huge tax payments simply because people did not seek proper advice at the right time. There are some very simple steps to protecting your wealth and they could end up saving you and your family a fortune.

Regarding closing of capital gain loopholes,

As of April 6 2015, all non-UK residents must pay CGT when selling UK residential property of any value. If you currently own a UK property, be it for residential or investment purposes, it is important that you are up to speed with the new Capital Gains Tax Rules introduced in 2015. When an asset, such as a house is sold or disposed of, Capital Gains Tax (CGT) is paid on any realised profits.

The total gain is calculated by subtracting the sale value from the property’s when the rule change came into effect. If you haven’t already, you should consider obtaining a valuation of your property, even if you don’t intend on selling it in the near future.

How you are impacted by UK CGT can differ based on your residency status. The tax rules in your current jurisdiction might make it advantageous to dispose of your assets before returning to the UK.

If you have any questions or queries on ANYTHING above I would be more than happy to advise and speak to you on a one to one basis, either email or call me direct.

All the best and have a great day

+60 3 2026 0286
[email protected]

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The UK Company Pension Crisis

The Final Salary Pension Scheme

The black hole in Britain's final salary pension schemes has grown to a record £390 billion, new data suggests. The deficit of all UK private sector defined benefit schemes has rocketed by £135 billion in the past year alone, the equivalent of a £2.6 billion increase every week, JLT Employee Benefits said. Widening pension deficits are in part triggered by ultra-low interest rates, which drive down the returns on Government bonds held by pension funds

http://www.thisismoney.co.uk/money/pensions/article-3686601/Total-deficit-final-salary-schemes-soars-90bn-384bn-Brexit-hits-funds.html

In monetary terms, Royal Dutch Shell has the largest pension deficit. The energy company currently has over £9.5 billion of pension liabilities, equating to a pension deficit of 15%. BT and BP are close behind with £7.5 billion and £7.3 billion of pension liabilities respectively.

BT is appealing to the fund’s trustees and telecoms unions to agree to end accruals in its defined-benefits pension scheme. It has more than 300,000 members and is the UK’s largest private-sector retirement fund.

http://www.telegraph.co.uk/business/2017/05/27/bt-cap-pension-pots-fill-14bn-hole/

https://www.theguardian.com/money/2016/sep/01/uk-defined-benefit-pension-fund-deficit-grows-100bn-one-month-pwc

In the last 12 months, the total disclosed pension liabilities of the FTSE 100 companies have fallen from £614 billion to £586 billion. Ten years ago, the total disclosed pension liabilities were £407 billion. A total of 16 companies have disclosed pension liabilities of more than £10 billion, the largest of which is Royal Dutch Shell with disclosed pension liabilities of £57 billion. A total of 21 companies have disclosed pension liabilities of less than £100 million, of which 12 companies have no defined benefit pension liabilities.

Situation update

The combined deficit of UK pension funds hit £500 BILLION! To put this in context, it’s the same amount as the GDP of Thailand or South Africa!

http://pwc.blogs.com/press_room/2017/04/uk-pension-fund-deficit-falls-to-500bn-according-to-pwcs-skyval-index.html

Pension experts are predicting that final salary pension schemes could be consigned to the history books, not in decades, but in just three years, as schemes close their doors to new members.

Why?

● Low gilt yield (UK government bond interest)
● Poor performance
● Members not contributing enough
● Higher life expectancy

The Pension Protection Fund (PPF), the government’s private enterprise safety net (not funded or guaranteed by the government) for members of final salary schemes, has stated there are over 5,142 schemes in deficit—representing 81.4% of all UK pension schemes.

The average deficit in funding for clients with UK schemes that I have met is 33%. That’s scary.

What could force a scheme into the PPF?

A firm becoming insolvent or pension fund trustees that just can’t handle the deficit. However, there have been recent cases of firms pushing away their pension fund liabilities.

A recent example of this is when UK Coal went into administration, and their 7,000-member pension pot went into the PPF. This is because the group responsible for repairing the pension deficit, of at least £450mn, sank into a long-anticipated administration.

This means that the guaranteed pension members were expecting will be drastically reduced by up to 50% in some instances.
Some schemes that are on my watch list have huge liabilities:

1. BT Group plc, British Airways and BAE Systems plc (the old privatized industry)
2. The National Health Service and any Civil Service pension
3. The Royal Bank of Scotland plc
4. Barclays plc
5. Royal Dutch Shell plc

Interest Rates linked to Pension Pot Values

Transfer values are at an all-time high currently, this is due to the post Brexit environment with government bond rates being at an all-time low, as they are correlated with interest rates, meaning employees are getting transfer offers around 30% to 40% higher than they were a few years ago.

Indeed some of these values have increased by as much as 25% in just the last 9 months. Bearing in mind interest rates haven’t been this low in over 200 years, they will soon start to rise, possibly by Q4 this year or the beginning of 2018 meaning the values of Pensions will drop dramatically, add that to a potential reduction in employees benefits in the future by the government, UK Pension schemes will be shockingly bad in the coming years.

https://www.ftadviser.com/pensions/2017/03/08/db-transfer-values-back-to-near-record-highs/

Annuity rates plummet, making 2017 'worst year for payouts

https://www.theguardian.com/money/2016/sep/14/annuity-rates-plummet-2016-worst-year-income-retiring-pensioners

2007 = 4.6% - 2014 = 3.2% - 2016 = 2.1% - 2017 = 1.5%

www.sharingpensions.co.uk

Annuity rates are based primarily on the 15-year gilt yields so changes in gilt yields will affect annuities. The attached chart shows yields reached an all-time low of 0.90% on 11 August 2016 after an interest rate cut to 0.25% and £70 billion of quantitative easing. The 15-year gilt yields had reduced significantly since June 2008 due to the financial crisis and this has had the effect of reducing annuity rates.

The drop is the biggest recorded and means over 55s swapping their pension pot for a guaranteed income in retirement today are now faced with some of the worst deals in history as annuity incomes have hit an all-time low.

Data from savings website, Moneyfacts, shows the average standard annuity income for a 65-year-old has fallen by 14.8pc on a £10,000 deal and by 15pc on a £50,000 deal so far during 2016, with potential to fall even further.

Steven Cameron, pension’s director at Aegon, added: "With annuity prices at an all-time low and unlikely to recover soon, people need to start thinking differently and keep their options open. Putting off retirement, continuing to work and save will be an option for some."

How can they fix the Final Salary Pension problem?

The governments are in talks to allow UK companies to start cutting benefits which is currently being reviewed and will be decided by the winter autumn statement in December 2017. Also remember how harsh they have been in the last year by changing IHT property tax, lowering the LTA (Pension Life time allowance on IHT), putting a 25% tax on moving your pension into a QROPS and changing the Shell offshore Pension scheme to 100% taxable residing in the UK. They are also looking at removing the Pension commencement

Lump Sum tax free benefit.

Any future changes the government plans to make, will be unlikely to come with any prior warning allowing you to move your pension and retain the tax benefits.

The problem is so big it is causing economic risk to the whole Pension system and the financial system, the FTSE 100 for example would have to hold back dividends for 1 full trading year, which is not going to happen. Halt trading??

What can you do?

You can move your UK Company Pensions into a Self-Invested Personal Pension (SIPP) is the name given to the type of UK government-approved personal pension scheme, which allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue and Customs (HMRC).

SIPPs are a type of Personal Pension Plan. Another subset of this type of pension is the Stakeholder Pension Plan. SIPPs, in common with personal pension schemes, are tax "wrappers", allowing tax rebates on contributions in exchange for limits on accessibility.

The HMRC rules allow for a greater range of investments to be held than Personal Pension Plans, notably equities and property. Rules for contributions, benefit withdrawal etc. are the same as for other personal pension schemes.

http://www.telegraph.co.uk/pensions-retirement/financial-planning/now-time-cash-final-salary-pension/

Benefits:

• It is a UK Pension Wrapper of your company pensions (You can consolidate all of your pensions under one scheme)

• Much wider selection of investments
• You can hold the pension in multiple currencies
• The internal investments are free of income and capital gains tax
• Take early retirement at 55 rather than 60/65 with Final Salary
• 25% tax free lump sum at 55% depending where you are residing
• On the event of your death your wife/family will get 100% of the remaining pension fund, (Final Salary Scheme – You will only receive 50%/60%, then should anything happen to your wife the children will get 0) with a SIPP they will get 100% of the remaining pot, allowing for greater inheritance benefits.

If you have a frozen defined benefit (DB) pension plan or final salary scheme, there has never been a better time to transfer into a SIPP Self Invested Personal Pension.

WHY?

Transfer values are 80% higher today than they were six years ago, due to post Brexit and extremely low interest rates, which will not last long possibly by the end of 2017.

Sit down and review your current situation, including the pension itself and the scheme. We have seen an increase in individuals who are fearful of the current UK pension crisis—with good reason.

However, there is an unprecedented window of opportunity available to eligible DB scheme members today, that may not be there by the end of this year.

Due to the complex and convoluted nature of pensions and pension transfers, we have an established a specialist pensions division and commissioned independent actuaries to review and report on the status of pension schemes for interested individuals.

This is a simple step to initiate, with no obligation to act on the results of the review. In many cases this action has already preserved and protected significant transfer amounts, converting a future promise into a real investment today for the benefit of the scheme member, spouse, children, and children’s children.

If you would like a valuation on your pension please contact me directly on +60 3 2026 0286 or email to [email protected] and we will uncomplicated this information and inform you of the options.

Thanks and have a great day
Duncan

If you feel that this is of interest to colleagues, friends or family, please feel free to forward this information on.

DB Pension Scheme Fact Sheet

Disclaimer: All of the information in this report can be found on the internet

Defined Benefits AKA Final Salary Pensions

To give you an idea of how things may have increased since you may have had your last valuations, the last two clients with final salary schemes that we retrieved valuations for had increased 30% since 2015, therefore we feel that the time is RIGHT, things are just going to get worse in 2017 onward for your DB Scheme.

There seems to be over £400 Billion pension deficit in the UK from DB Schemes, the government will have no choice soon to either cut these DB schemes or the trustee will be granted lower pay outs on pension commencement.

We have included below some interesting points regarding final salary pensions in the UK which may help shed some light on things:

• The current pension valuations are high, simply because annuity rates are very low.

https://www.theguardian.com/money/2016/sep/14/annuity-rates-plummet-2016-worst-year-income-retiring-pensioners

This site shows what has happened since Brexit and we expect rates to get better in the short term and I believe that any valuations now, will be significantly lower in 12 months’ time – The UK has already announced that interest rates will be rising to 0.5% next year, this will lower transfer values significantly.

• On the above point, each pension valuation requested is only valid for 90 days and you are allowed one a year. Therefore if a decision is to be made, it must be made relatively quickly.

• Legacy planning in my opinion is the most important point. At the moment, in most final salary schemes, your spouse will get 50% of the final salary income in the event of your demise. You’re children in turn will then get zero when both of you are no longer around. Our solution being presented will allow the full sum of your pension fund to be passed on according to your requests, it will also be sheltered from any inheritance/death tax at least up until the age of 75 (differing from QROPS to SIPP).

• If anything were to happen to your UK scheme, you could end up with the pension protection fund, which pays a maximum of 35k per year and there is no guarantee that you will get the full quota. This is unlikely, but seeing 20 or 30 years into the future is impossible.

• Going into the future, final salary schemes have cut income for members and many schemes have simply cut payments by 30% (via legal actuarial reductions).

To back this up, please see this worrying article

https://www.theguardian.com/money/2017/jan/04/final-salary-pension-deficit-biggest-listed-firms-uk

with the total combined deficit in the UK for final salary pensions growing from £39 billion (2015) to £182 billion (to date).

http://www.pionline.com/article/20170502/ONLINE/170509973/uk-corporate-pension-deficit-rises-nearly-6-in-april.

• http://www.thisismoney.co.uk/money/pensions/article-3686601/Total-deficit-final-salary-schemes-soars-90bn-384bn-Brexit-hits-funds.html

If you have a DB Scheme and have left that company or the UK, now is the time to get a valuation and we can assist, please drop us an email to [email protected]

Annuity rates plummet, making 2016 'worst year for payouts' Average income for retiring pensioners has fallen by 15% so far, MoneyFacts data reveals

The gains in global economic momentum we saw in last year’s final quarter have it seems, continued over to the 1st Quarter of 2017. However, the large part of this gain in global growth has been in the developed countries, in particular Europe and the US driven by robust domestic demand. All three of the US indexes have seen record highs with all three having hit closing records at the same time, the longest triple winning streak in 25 years.

The pan-European Euro Stoxx 600 index recorded a 5.5 percent increase for the quarter, aided no doubt by the DAX’s best Q1 gain since its inception in 1988, while the FTSE 100 defied Brexit fears to enjoy a record run in March led by banking stocks which rallied on bullish broker notes and European Central Bank rate hike talk.

China’s start to the year surprised many analysts, as a booming real estate market and stronger global growth boosted manufacturing output and investment. Asian economies, in particular Southern Asia, are benefiting the most from strengthening global trade, with exports in a number of countries expanding at multi-year highs at the start of the year.

President Donald Trump and Chinese President Xi Jinping have met and for now at least, calmed initial fears of an open trade war between the world’s two largest economies. The two leaders have set a 100-day plan to address the trade imbalances between the two nations.

In Japan, the significant political event was the meeting in February between Prime Minister Abe and President Trump in Washington and Florida. The meeting appeared to be surprisingly cordial despite the previous US rhetoric around trade imbalances and Japan’s foreign exchange policy. During a four-day trip to Europe in mid-March, Prime Minister Shinzo Abe and German Chancellor Angela Merkel called for the swift signing of the free trade deal between the European Union and Japan, in negotiation since 2013.

A pickup in global demand and a weak yen continued to support the Japanese economy at the outset of the year. Higher demand for Japanese goods is also boosting activity in the manufacturing sector. However, weaknesses that plagued growth in 2016 have also carried over to this year and despite the continuous fall in unemployment, sentiment among Japanese consumers remains downbeat.

Emerging markets surprised many global investors with a strong rally after the Federal Reserve’s rate increase with the MSCI Emerging Markets Index rose almost 4% in the week to the highest level since June 2015. While higher U.S. borrowing costs typically boost the dollar, policy makers were less hawkish than investors expected, sending the dollar lower and emerging markets assets higher. However, rising protectionist rhetoric and the expected tightening of financial conditions pose new threats to emerging markets, the IMF noted in its World Economic Outlook report - "Together with a risk of protectionism in advanced economies and tighter financial conditions as U.S. monetary policy normalizes, these changes make for a more challenging environment for emerging market and developing economies going forward," the report also said.

The price of Crude Oil was stable throughout Q1 as increased shale production from the US balanced against the OPEC production cut, and the price of nearby NYMEX crude oil futures remained above the $50 per barrel level for the majority of Q1. Towards the end of the quarter, the price slipped to a low of $47.01 as inventories in the US rose to a record level according to the Energy Information Administration, but the price moved back to close on March 31 at just above the $50 mark. The $50 is a price that both consumers and producers around the world can support.

The dollar index moved lower by 2.02% in the first quarter of 2017 and Commodities prices moved higher with four of the six major sectors posting gains. Initially the dollar had rallied to its highest level since 2002 in January but then corrected after the Federal Reserve raised interest rates. 4 of 6 major commodity sectors showed gains with precious metals leading with an 11.45% increase in Q1 (Gold 8.63%, Silver 14.51%, Palladium 17.46%). Base metals posted a 6.65% increase as disruptions at copper mines, the prospects for infrastructure rebuilding in the U.S., and Chinese demand supported prices.

The Energy sector which had been a leader in 2016 was one of the biggest losing sectors in Q1, the composite of the primary energy commodities traded on US futures markets lost 5.35% during the first three months of the year.

LOOKING AHEAD

Despite the promising start to the year, there are events that may yet hamper the global economic recovery. UK Prime Minister Theresa May invoked Article 50 on 29th March, triggering the long-awaited Brexit process and sending the European Union and the United Kingdom into unchartered waters.

Free movement of people between the island and the continent and the trade deal will be the cornerstones of the negotiations. Also, the Prime Minister will have to contend with the Scottish government’s plan to hold a second independence referendum before March 2019.

European elections will also be in the spotlight as the emergence of anti-EU parties continues to threaten the stability of the European Union. The recent defeat of right-wing populist Geert Wilders and his Party for Freedom in the Netherlands has calmed tensions but French voters now head to the ballot box on 23 April to choose a new president, with the far-right runner Marine Le Pen likely to make the second round of voting.

However, latest polls show Macron and Le Pen clinging on to the narrowest of leads on 22% to 23%, while a late surge by the hard-left candidate Jean-Luc Mélenchon and scandal-hit right-winger François Fillon appears to be holding, putting both on between 19% and 21%. Just days from Sunday’s first round of voting and with up to a third of the electorate still undecided, this race has become far more closely contested than most voters would have thought and is still wide open.

Meanwhile in six months’ time, Germany will go to the polls in a showdown between pro-Europe candidates Chancellor Angela Merkel and her Social Democratic challenger Martin Schulz. The dominant issue of their campaigns no doubt being what to do about the European Union?

Another complication for the European Union is the recent referendum victory of President Recep Tayyip Erdoğan in Turkey. The country began talks about joining the EU back in 2005 but have made little progress due in large part to Turkey’s Human Rights record and the fact that some EU nations were uncomfortable with a mostly Muslim nation joining the bloc.

Recent talk of Erdoğan considering reinstating the death penalty in Turkey, as well as the fact that many see the vote as the start of a de facto dictatorship, mean the majority of views at the moment reflect that this is the end of the road for Turkey accession into the EU.

However the European Union will be more than aware that in return for economic aid, Turkey presently stems a large percentage of migrants that would otherwise head to the EU.

Also, as a recent article by The Economist reflects: “As a NATO member and a regional power, Turkey is too important to cut adrift. It will play a vital part in any peace in Syria. Driving it into Russia’s arms makes no sense. “

Uncertainty surrounding Trump’s commercial policies will continue to weigh on global trade prospects. Moreover, although the Federal Reserve recently delivered its second rate-hike in three months, as markets expected, analysts believe that the Fed is more confident about inflation prospects and could accelerate its tightening cycle. This situation could fuel volatility in the financial markets, particularly in developing countries.

The U.S. energy department on Friday 31st March released supply and demand figures for January, the latest month available, saying the country's oil demand for that month was up 0.9 percent at 19.234 million barrels per day, while production rose 60,000 bpd to 8.835 million barrels.

As the biggest producer in OPEC, all eyes have been on Saudi Arabia to see if they would indeed honour all aspects of the recent agreement. So far it would appear Saudi Arabia have indeed reduced output by 111,000 barrels a day last month bringing the daily output down to 9.9 million, well below the agreed upon quota.

With economic data for Q1 suggesting that the global economy is recovering at a healthy pace, news that a number of governments, notably China and the United States, will use fiscal policy to support the economy is posing upside risks to the world’s economic outlook. Although higher commodity prices will erode consumers’ purchasing power via rising inflationary pressures, they will also help replenish the empty coffers of some emerging-market nations.

On the downside, spill-overs from the triggering of Brexit, uncertainty regarding U.S. President Donald Trump’s trade policies and a faster-than-anticipated tightening by the U.S. Federal Reserve continue to weigh on global growth prospects.