New COVID-19 strain makes pandemic spiral out of control 

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COVID concern indices have increased by more than 10% since mid-December 2020, with personal worries spiking by over 20% and returning to levels last seen at the start of the pandemic. A new and more contagious variant of the novel coronavirus was reported in the lead-up to the winter holiday period. It has made UK pension professionals much more alarmed, with a greater than ever proportion reporting positive COVID-19 diagnoses amongst their loved ones. 
 
 
 

Focus on vaccinations distracts from understanding transmission patterns 

 
Our COVID research panel now believes there is a disproportionate focus on vaccinations instead of virus transmission patterns, despite an R-rate as high as 1.4 in some areas. Vaccinations have started, but pressures on the NHS are now causing delays in the delivery of the second dose to make a first dose available to a greater proportion of the population. 
 
However, Pfizer have not tested the efficacy of the vaccine under such circumstances, and the World Health Organisation (WHO) do not support delays between the two vaccine doses. This makes some UK pension professionals sceptical that vaccines can help eradicate the virus, especially if it continues mutating. 
 

Vaccination effort will determine timeline for return to ‘normal’ 

 
Even though the expected minimum duration of the outbreak has remained little changed at over seven and a half months, the optimistic estimate for the end of the outbreak keeps shifting. Not only is a COVID summer now seen as unavoidable, but the outbreak may not subside sufficiently until September, further delaying any return to ‘business as usual’. And if the vaccination programme fails to produce the desired immunity levels and alleviating pressure on the NHS, this horizon will likely move further into the future. 
 
 
 

Government policy is not proactive enough to control the virus 

 
Over 60% of UK pension professionals are now ‘very’ to ‘extremely’ worried about the UK government’s handling of the pandemic – a record for this index series. They increasingly see the government’s policies as reactive, adding to its track record of putting off tough decisions such as the rules for Christmas and the latest lockdown measures. In addition, some fear controls will yet again be removed too early, as the UK government has repeatedly underestimated what is needed to control the virus. 
 
Some have said that the UK government is giving priority to the views of economic ‘hawks', thereby extending the “devastating” impact of the pandemic and “failing” in its primary duty to protect UK citizens. This has also put the NHS under such severe pressure that neither COVID-related care not other services are functioning properly. 
 
 
 

Worsening outlook is not factored into economic expectations 

 
Despite the poor outlook for the pandemic, the minimum expected duration of its macro consequences has decreased by 8%, suggesting a possible recovery in economic activity by the end of Q3 2023. Our COVID research panel believes this echoes the disconnect between the global economy and markets, with the latter performing in a way that is not reflective of the accumulating risks. Some expect 2021 to bring more corporate failures and unemployment, spelling trouble for sponsor covenants and scheme valuations. But for many others, these risks did not really materialise in 2020. One thing is clear – the deteriorating outlook has not yet been fully factored in. 
 
 
 

What do the next few months hold for the UK and global economy? Click here to tell us in our bi-weekly survey. 

 
 

Previous articles in this series: 

 
 
 

About the COVID Concern Index 

 
This short survey helps gauge sentiment of our community on the pandemic. The results are distributed via the community newsletter. Until 31/08/2020, this was a weekly survey. From 01/09/2020, the survey shifted to a bi-weekly cadence. 
 
The COVID Concern Index values should be used as indication only and do not constitute advice. Their values are bound by the choices available in the survey on which they are based. 
 
COVID Concern Index: 
 
  • 0 = respondents are not worried at all 
  • 100 = respondents are extremely worried 
 
Expected minimum duration of outbreak: 
 
A methodology change took place on 06/10/2020, affecting data from 20/10/2020 onwards. 
 
Prior to 06/10/2020: 
 
  • Lowest possible value = 1 month 
  • Highest possible value = 6 months 
 
Following 20/10/2020: 
 
  • Lowest possible value = 1 month 
  • Highest possible value = 12 months 
 
Expected minimum duration of macro effects: 
 
A methodology change took place on 15/04/2020, affecting data from 21/04/2020 onwards. 
 
Prior to 15/04/2020: 
 
  • Lowest possible value = 3 months 
  • Highest possible value = 12 months 
 
Following 15/04/2020: 
 
  • Lowest possible value = 3 months 
  • Highest possible value = 60 months 
 
Macro rates index: 
 
  • -100 = all respondents think rates will fall 
  • 0 = all respondents think rates will stay the same 
  • +100 = all respondents think rates will rise 
 
Sector sentiment index: 
  •  
  • -100 = all respondents think the sector will be a ‘loser’ in the pandemic 
  • 0 = all respondents see a neutral outlook for the sector 
  • +100 = all respondents think the sector will be a ‘winner’ in the pandemic 
 
Concerned about the coronavirus outbreak and its macro implications? Click here to take part in the bi-weekly COVID-19 survey.