December 2021 Newsletter

The very recent identification, spread and impact of the Omicron variant, reminds us all that life, like the financial markets, continues to react and adjust to the impact of COVID-19. News, be it financial or political, quickly becomes outdated, but it is still helpful to review where we have been to provide glimpses of where we may be in the New Year. In this newsletter, we bring you views on the financial markets and UK pensions’ updates.

During this time of giving and community spirit, we have also highlighted one of the key charities that Florin Pensions continues to support, the British Benevolent Society.

From everyone at Florin Pensions, we wish you and your loved ones a very happy and healthy holiday season.


December 13, 2021

John Stoltzfus
Chief Investment Strategist, Managing Director
Oppenheimer Asset Management

How High the Moon?

We’re peering over the Market Strategy Radar Screen and we’re offering a 2022 price target and our rationale for how we could see it come to pass.

Key Takeaways

  • We initiate our price target for the S&P 500 by the end of 2022 of $5330. Our price target is based on our earnings projection of $230 for the S&P 500. Our price target is based on a number of assumptions that we provide in today’s report.
  • This week, investors will likely focus on the Federal Reserve’s FOMC meeting which concludes on Wednesday. Investors will look for clarification for how long the tapering will take and any indication of how long or how far the Fed tweaks its benchmark rate higher.
  • Economic data last week saw the CPI inflation rate rise to a 40-year high as supply bottlenecks and labor shortages continue to hamper the US economic expansion.

We initiate our target price of $5330 for the S&P 500 by year-end 2022 or for a 13% rise above the benchmark’s closing price on last Friday December 10. Our earnings projection of $230 for the S&P 500 calls for earnings growth in 2022 of around 12% and a P/E multiple of 23x. Our price target is based on a number of assumptions that include:

  • Further success by science in addressing and responding to challenges brought by the COVID-19 pandemic and its variants;
  • Continuation of the stateside economy to show resilience amidst the current period of uncertainty in a process of reopening
  • Positive corporate revenue and earnings trends likely to persist as the US economy moves out from under pandemic oppression toward the next new normal.
  • Monetary policy at the Federal Reserve to remain supportive of the US economy as the central bank tapers to end its monthly bond buying program over the course of the next three to six months.
  • The length and pace of the tapering period is to be determined by the degree of resilience exhibited in economic data over the course of the taper as well as by improvements in other key areas including: suitably addressing higher inflation trends and restoring supply chain efficiencies
  • A start of a first tranche of stimulus tied to infrastructure spending if not in the first quarter of 2020, then before the end of the first half of 2022.

We do not expect the Fed to slam on the brakes to choke off liquidity but rather look for the central bank to “pump the brakes” as lightly as it can as it takes the mechanisms of emergency stimulus off gradually.

We base our target price on further assumptions that include:

  • Continuation of approvals by the FDA; successful rollouts and acceptance by the public of vaccine(s) capable of stemming the spread of the COVID-19 pandemic and its variants including Delta, Omicron and others.
  • The equity market’s capacity to discount the success of said vaccines in stemming the spread of COVID-19 as well as
  • Continued material progress in reversing the societal and economic disruptions wrought by the pandemic since Q1:22
  • A further broadening of investor appetite (among professional and private investors) for stocks that favor diversification and utilize both growth and value segments of the market in what is likely to remain a relatively low interest rate environment that favors equities, real assets, and other assets.

The Fed’s Policy Comes into Focus

This week investors will be attuned to the outcome of the Federal Reserve’s FOMC meeting with hopes held high for some clarification for just how long the tapering process will take (three months? six months?) and just when might the Fed expect to begin tweaking its benchmark, the fed funds rate.

In our view, central bankers will likely dole out information over the course of the next two quarters as they consider just how soon the “training wheels” come off as the economy likely continues to gain traction.

We do not expect the Fed to slam on the brakes to choke off liquidity but rather look for it to “pump the brakes” as lightly as it can as it takes the mechanisms of emergency stimulus off gradually.

The market may express frustration with a tantrum or two as the process takes place. However, barring any unexpected exogenous shocks or black swans making an appearance on the scene—things could actually continue to get better even as some things worsen. As a bard and Frank Sinatra once sang, “that’s life and you can’t deny it.”


For US wealth management advice, Florin Pensions partners with Oppenheimer & Co. Inc. (OAM) through OAM’s Professionals Alliance Group. Through this partnership Oppenheimer and Florin Pensions are able to help clients develop comprehensive solutions to address the financial objectives for both their UK pensions and US financial assets. Combining the services of both firms enables Florin Pensions to provide clients with a holistic financial strategy where their UK pension is managed in tandem with their wider US wealth. To learn more about OAM and Florin Pensions’ strategic alliance, please contact your Florin Pensions adviser.

Important Disclosures and Certifications

The published date of the recommendations contained in this report can be found by accessing disclosures ( This report was produced at December 6, 2021 06:05 EST and disseminated at December 6, 2021 06:05 EST. Strategist Certification – The author certifies that this investment strategy report accurately states his/her personal views about the subject securities, which are reflected in the substance of this investment report. The author certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this investment strategy report.


1 August 2021 – 31 October 2021

Toby Ricketts
Margetts Fund Management Ltd.

During this reporting period, measured by the Investment Association peer groups (sectors), strong performance came from IA North American Smaller Companies (5.19%), IA North America (5.07%) and IA Japan (4.10%). Most bond sectors recorded negative returns for the reporting period, with notable sectors being IA Gilts (-2.25%) and IA £ Corporate Bond (-1.63%). Aside from IA Latin America, all equity sectors managed a positive absolute return over the period.

Inflation proved to be the dominant theme of this reporting period. In the US, the Consumer Price Index (CPI), being the key measure of retail price inflation, has held steadily above 5% Year on Year (YoY), at the highest sustained level since the financial crisis.1 In the UK, CPI pushed above 3% YoY, with the Bank of England and the Office for Budget Responsibility both projecting a rise above 4%, before eventually lessening later in 2022.2 Across the European Union, CPI also pushed above 3% YoY in this reporting period.3 Central banks have been reassuring markets that inflationary pressures are transitory; even if this is the case, it will be a lengthy transition at best with input manufacturing, commodity and transport costs still increasing and yet to be passed through to the consumer.

As a result, market participants have been stepping up their expectation of earlier tapering and interest rate rises from central banks. In the UK, the two-year gilt yield jumped to 0.75%,4 and in the US, the two-year treasury yield has almost doubled since the start of October.5 These patterns reflect investor concerns that inflation will force rates off their historical lows as central banks are pushed to act on their mandate to target 2% inflation. Smaller relative movements at the longer end of the yield curve are indicative that traders see a return to the normality of “lower for longer” rates once the pandemic has passed. This seems an optimistic assumption given the colossal increase in money supply in developed economies (the US in particular) during the pandemic, as can be seen in the below chart.6

Historically, low money velocity has kept the lid on inflationary pressure so far since the financial crisis but, with bank lending and consumer spending now likely to increase coming out of the pandemic, and the possibility of this long-term trend reversing as a result, who (outside of pension managers matching liabilities) would be confident of another decade or more of benign bond markets at the current prices? 7

Another shadow that loomed over the reporting period was the potential shutdown of the US government and the re-imposition of the debt ceiling after a two-year suspension expired. The US Treasury was predicted to run out of cash and exhaust its extraordinary reserves by October 18th. 8 The US has never defaulted on its debt obligations before, but close-run calls due to bipartisan standoffs have affected markets in the past; notably in 2011 when S&P downgraded the US credit rating from AAA+ to AAA, and equities fell in the following months. The government shutdown was avoided by a short-term bi-partisan bill which will fund government until early December, effectively kicking the can down the road. 9 A similar solution was found to the debt ceiling, which was narrowly passed through the Senate and will increase the debt ceiling by $480bn, which should avoid default on the nation’s debts until early December. 10 Both these issues will emerge again in the next reporting period, and hopefully will result in a more abiding solution.

The potential path out of Covid-19 has continued to be demonstrated by the UK. Active cases have remained high, averaging just below the peaks seen over the previous winter, but the comparable hospitalisations and mortality statistics are only a fraction in comparison to the previous waves. 11 Towards the end of October there was an unexpected dip in cases which, if the trend continues, would support the government’s intention to avoid reimposing restrictions over the winter. A deeper dive into the data demonstrates that cases have been disproportionately driven by schoolchildren; notably the 11–16-year-old range which, in the most recent data (as of 16th October), has seen positive cases across c.8% of those tested among the group. Ages 2-11 also had a heightened positive test percentage close to 4%. 12 The vaccination rollout of single Pfizer doses to secondary school children, which has been ongoing, should slow some of the transmission chains, as should the half-term break. Booster jabs for the vulnerable and elderly ought to improve hospitalisation and mortality statistics where, statistically, most deaths have occurred. Out of 95,329 deaths in England due to Covid-19, 87,142 of these have been aged 60 or over, and less than 1% have been among those younger than 40. 13

The Asia Pacific region equity markets were disrupted by two significant mutually exclusive events. The Evergrande property group, China’s second biggest property firm with liabilities of over $300bn, saw its share price plummet as it announced that it was unlikely to be able to pay upcoming coupons to bondholders. Asian markets suffered a wider sell-off as a result, and peer property developers Sinic Holdings and Fantasia Holdings also failed to pay coupons which were due. Evergrande managed to pay domestic bondholders their next coupon and, despite many commentators expecting offshore bonds to be sacrificed to prioritise the domestic bonds, Evergrande was able to pay the $83.5m outstanding coupon overdue from 24th September and avoid a technical default. 14 Attempts to raise capital through the sale of 51% of its property management arm to a smaller competitor Hopson Property, and the sale of the company headquarters in Hong Kong, have both fallen through in recent weeks. 15

The Chinese government intervened heavily once more in the private sector, imposing an edict that under 18s should not play more than 3 hours of video games a week. 16 This was not as unexpected as it might have been, with previous communications from the government highlighting concern over video gaming as a “spiritual opium”. This followed on from the effective ban on private tutoring companies. Beijing also stepped up its efforts to further close the net on cryptocurrency, declaring all cryptocurrency transactions illegal. 17

“Virtual currencies do not have the same legal status as legal tender… Virtual currency-related activities are illegal financial activities… Provision of services by overseas virtual currency exchanges to residents in China via the internet is also considered to be an illegal financial activity.” 18

While the short-term impact on asset prices can be tough to stomach, for the long-term investor in Asia Pacific Equities this intervention with the intention to drive China towards common prosperity could drive wider growth in the economy by improving the prospects of smaller domestic companies. Andy Rothman’s recent Sinology column for Matthews Asia, “What is Xi Jinping Thinking”, is a nuanced rational take on the regulatory intervention and its potential upside:

“Higher wages for low-skill workers would support domestic consumption, the largest part of the Chinese economy…. Curbing anti-competitive practices by larger firms would support development of small and medium-sized firms, which employ the majority of China’s workforce.” 19

Market Outlook

Inflation is proving to be stickier than the market predicted, in line with our expectations and, although the likelihood of a repeat of the double-digit inflation of the 1970s is unlikely, central bankers are showing similar signs of complacency by focusing on unemployment and continuing fiscal stimulus, rather than the reality in the pocket of the consumer. The risk of policy error is palpable.

Equities appear on face value to be much preferable to bonds, as bonds are demonstrating less of an inverse correlation to equities at present than in the recent past. With central bank support likely to be withdrawn from the markets, yields are expected to rise, and long-duration bondholders could end up nursing extensive capital losses on what is ostensibly a “safe” asset class.

There are signs of stretched valuations within markets, especially within ‘trendy’ assets such as crypto currencies and green energy. Technology stocks, particularly those with high debt requirements, have benefited from lower borrowing costs and seen their own valuations correlate with bond markets, but look vulnerable to future interest rate increases.

Traditional equities have largely recovered in terms of dividend payments, having been slashed during the onset of the pandemic, with the gap between bond yields and dividends widening again. A well-diversified equity portfolio can help to reduce risk and, while markets may trade sideways flipping between growth and value style for a while yet, the potential upside in terms of capital growth and income generation, especially in a heightened inflation environment, has clear advantages over bonds.

We expect higher volatility at stock level going forward as markets adjust to the prospects of higher inflation and interest rates. There is some scope for capital destruction and therefore ‘old’ economy stocks with low valuations are preferred to their higher valued technology counterparts. Similarly, shorter dated bonds are favoured, which are less sensitive to interest rates, providing lower expected returns but also with lower capital risk.


If you are over 50 years old you may feel like you receive a lot of paperwork from your UK pension provider. This includes what is referred to as a “wake-up pack”.

Since November 2019, UK pension providers have been required by UK regulation to issue wake-up packs at certain points in clients’ lives to encourage them to think about when and how they will take pension benefits in the future.

Wake-up packs are issued to every client immediately after their 50th birthday, immediately before their 55th birthday and thereafter every five years until their pension is fully “crystallised” (see Jargon Busters article).

Wake-up packs are predominately aimed at non-advised clients to help increase their engagement in planning for their retirement. However, advised clients are also required to receive these packs. Each pack includes a one-page summary of the client’s UK pension and then risk warnings flagging key issues that should be considered before taking pension benefits like tax issues, pension scams and investment risks. For those over age 55, the pack also includes information on how to access the UK government’s Money Helper service for additional guidance.

Your Florin Pensions adviser will contact you at important retirement milestones, including age 50 and 55, to discuss your UK pension. However, receipt of your UK pension provider wake-up pack also serves as a useful reminder to keep your UK pension and retirement plans under review with your adviser.
That said, it is important to understand that receipt of a wake-up pack does not require a you to take any action in terms of accessing retirement benefits, if not desired. It is sent by UK pension providers purely to act as a prompt for review and discussion of a client’s UK pension.

If you have any questions regarding a wake-up pack, or want to schedule a review of your UK pension, please contact you Florin Pensions adviser who will be happy to assist you.


The UK Finance Bill published in November 2022 (the “Bill”) has reconfirmed the rise in the normal minimum pension age (“NMPA”) to 57 on 6 April 2028. Currently the NMPA is age 55.

Surprising to many, the Bill includes changes from the draft rules issued earlier this year which would have given pension members until 5 April 2023 to either join or transfer into a UK pension plan that could offer a protected pension age of 55.

Now, under the Bill, only pension schemes that had the right to take benefits at 55 in their rules as at 11 February 2021 will be able to protect that age for existing members (and any others who joined the scheme by 3 November 2021). This is more commonly seen in occupational pension schemes, not UK personal pensions which often link the age benefits can be taken with the “normal minimum pension age” (e.g. not a specific age). People in such personal pension schemes will, consequently, have their minimum pension age rise to age 57.

The government amended the Bill to address industry concerns that unscrupulous advisors may encourage pension members to rush into pension transfers with poor outcomes before the transfer window closes on 5 April 2023.

This change to the NMPA will affect people without a protected pension age who were:

  • born after 5 April 1973; or
  • born between 5 April 1971 and 5 April 1973 who will have a window from their 55th birthday to draw retirement benefits before the NMPA increases to 57.

This two-year increase in the NMPA could result in added complexity for people that have more than one UK pension with different ages in which they can take pension benefits. However, for most people an increase in the NMPA by two years is unlikely to significantly impact their retirement plans. Florin Pension’s view remains that, in most cases, it is best not to access a tax deferred UK personal pension or US retirement account until a person is in retirement.

We continue to consult with our clients’ UK pension providers to discuss the Bill. It is important to note that changes could still occur to the Bill, as part of the parliamentary process, before it becomes an Act. We will update you as this matter develops to confirm how these changes could impact your UK pension in the future.


Flexi-Access Drawdown

Also referred to as income drawdown, it is a way to access your UK personal pension as and when desired during your retirement, while your remaining funds remain invested. This type of pension provides more flexibility than an annuity, and can mean you/your beneficiaries receive more money than you would under an annuity. However, income levels are not guaranteed, your funds typically continue to be exposed to market fluctuations and you could exhaust your pension during your lifetime. Flexi-Access Drawdown replaced Capped Drawdown from April 2015, though existing users of Capped Drawdown can continue in that plan.

UK Lifetime Allowance

The Lifetime Allowance (LTA) is the maximum value of pension savings that you can build up without incurring a UK tax charge at the time you draw pension benefits as cash or a pension (and without leaving a tax charge for your beneficiaries if you die before age 75). The LTA is currently set at £1,073,100. If you exceed the LTA, UK tax is payable on the excess amount at 55% if taking the excess pension as a lump sum or at 25% if you take it as income. In some circumstances, a person may have a higher LTA if that person applied to HMRC for certain protections. If you have questions about how the LTA may affect your UK pension, please contact your Florin Pensions advisor.

UK State Pension

A regular payment from the UK government that you qualify for when you reach State Pension age. The amount that you receive will depend on your National Insurance record. You need 10 years of UK National Insurance contributions to be eligible for the new State Pension, however, you may be able to use time spent abroad to make up the 10 qualifying years.

Pension Commencement Lump Sum (PCLS)

When you start to draw from a UK pension, you can usually take up to 25% of your personal pension (up to your LTA limit) as UK PCLS. PCLS is often known as UK “tax free cash” or a UK “tax free lump sum”. When considering whether to take your PCLS, we strongly recommend that you speak to your US/UK tax adviser to discuss what the tax treatment for your PCLS would be from a US taxpayer perspective.

Crystallised Pension

A crystallised pension is the opposite of an uncrystallised pension, which is the term for a pension that is not in drawdown or an annuity. Crystallising a pension is the process of taking pension benefits. While your pension fund is available to take benefits, you do not generally pay tax on your crystallised pension until you start drawing income from it.

Crystallisation events include taking up to 25% of your pension fund as a UK pension commencement lump sum and/or drawing income from your UK pension. Every time pension benefits are taken, the crystallised value is tested against the UK’s lifetime allowance (see above). The crystallised value for a defined contribution scheme is the amount of the pension fund drawn.


The British Benevolent Society of California (BBS) is a charity that provides aid and relief to British citizens in need. Support comes from donations, legacies and fundraising by members, and the community in the western United States. They are able to provide assistance to British nationals living or residing in the states covered by the British Consulates in San Francisco and Los Angeles including: California, Nevada, Idaho, Wyoming, Oregon, Washington, Montana, Hawaii and Alaska.

British Benevolent Society logoThe BBS responds to appeals for one-time emergency assistance and, in exceptional circumstances, provides longer term support. The reasons individuals apply for assistance are vast. The BBS meets immediate needs and provides transformative services to help British nationals achieve stability and access the resources they need.

Historically the BBS provided $30,000 in aid and relief annually. In 2020, the BBS provided $130,000 in financial assistance, more than half of that was directed to Brits impacted by the global pandemic. After 20 months of the pandemic, they continue to be made aware of Brits still in need of their help. By the end of 2021, the BBS will likely have provided just under $100,000 in emergency financial assistance.

If you would like to learn more about the BBS, please visit their website at or a short video at for more information.


What is your favorite British export? For the Florin Team it is:

Emma Cockerton

My favorite British export would have to be British creativity in all its various guises from our immensely talented musicians, to films, television, fashion, cooking, architecture and art. For a country that is smaller than the state of California, Britain’s impact on the arts in the United States (and globally) cannot be underestimated!

Charles Cockerton

My favorite British export is our British sports, in particular the game of cricket. I love cricket not just for the game but also its community. When my family first moved to the USA, and did not know anyone here, I joined the Marin Cricket Club’s social team. I was immediately made to feel very welcome by the fellow players, their families and club supporters, many of whom had also moved here from other countries to build new lives. The game of cricket gave us all the opportunity to come together, make new friends and have some fun.

John Tunstall

My favorite British export is the rule of law and a sense of fair play! Very underestimated but still evident in our nation today, from a political and sporting sense (perhaps with the exception of certain Premier League soccer players!).

Mark Solomons

My favorite British export is on the food front and is, without a doubt, Heinz baked beans. If I could, I would have almost every evening meal with them. Not only are the beans delicious, but the tomato sauce turns any boring meal I might make into a delicious one.

Kelci Laam

The answer is purely elementary… Sherlock Holmes! He is the master of deduction and disguise. He is witty with a sarcastic, dark humor. He is a scientist and inventor with endless knowledge. His colleague, Dr. Watson, is the perfect balance to his brilliance. Sherlock Holmes was my introduction to the detective & murder mystery genre. The character has inspired many books, movies and shows that I love.


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The information contained in this newsletter is intended for non-UK residents and for your general information and use only. It is not intended to constitute or substitute investment advice or recommendations as to the suitability of any specific product or security. Florin Pensions LLC does not provide tax advice. Florin Pensions LLC is an investment adviser registered with the United States Securities and Exchange Commission. Contact us to receive a copy of our firm brochure.