Auto Enrolment to hit workers take home but prepare better for retirement

April 11, 2018

President XiUS – China Trade Wars

Movements towards a much more widespread trade war between China and the US developed last week. On Monday, China hit back at the initial steel and aluminium tariffs implemented by the US by announcing additional levies on around $3bn of US imports. President Trump reacted barely 24 hours later with a threat to target another $50bn of trade in Chinese goods only to be matched with a similar announcement from China. The week finally escalated to Trump calling for another $100bn of trade to be considered for tariffs. The markets whipsawed as investors attempted to work out if the announcements were merely negotiating tactics or plans that were ultimately going to be implemented. Both sides are convinced that they will be the ones that can continue for the longest and ultimately “win”, however, a short resolution of the current grievances would be in the best interests of all.

US Jobs Growth Slows

US non-farm payrolls grew by 103,000 in March, significantly below expectations. However, this is following a strong rise during the first two months of the year and an average of over 200,000 per month for the first quarter. The growth was enough to maintain the unemployment rate at a low of 4.1%. The closely watched average hourly earnings also accelerated slightly to 2.7% year-on-year, indicating that the tightness in the labour market may be beginning to follow through into wages. While the overall impression of the March data was disappointing, it is likely that the Federal Reserve will not stray from their current path of monetary tightening as a result. Monthly data is notoriously volatile and will be revised several times before conclusions will be made.

Auto-enrollment retirementUK Auto Enrolment

As the new tax year begins, the auto-enrolment pension programme will see its participants and their employers increase contributions to 3% and 2% correspondingly. This will impact employees take home pay negatively, although overall pension saving should increase sharply. We may therefore see disposable income take a hit initially, however, the woefully low savings ratio should begin to increase. Additional rises, to a total of 8%, are scheduled to come into effect in 2019 and may well be increased further in the future.


Market Data

Index Open Close Change % Change
FTSE 100 7056 7183 127 1.80%
S&P 500 2640 2604 -36 -1.36%
Dax 12096 12241 145 1.20%
Cac 40 5130 5258 128 2.50%
Nikkei 225 21159 21567 408 1.93%
UK 10 Year Gilt Yield 1.35 1.4 0.05 3.70%