Pension professionals urge caution as vaccination efforts continue 

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Pension professionals are more concerned about the risks COVID-19 poses to their loved ones and professional lives than to themselves. Some members of our COVID concern research panel worry about new variants or longer vaccination wait times for groups considered ‘non-essential’. Another ongoing concern is the possibility of people feeling disinclined to follow lockdown protocols after they get vaccinated. Others suggest that overconfidence after vaccinations could even prolong the lockdown and erase the positive gains from the vaccine rollout. 



A return to some normalcy by early summer—too good to be true? 
 
Our COVID research panel believes that we are likely to see our friends and family as early as June—but only within the UK. Many say their renewed hopefulness is because of the successful vaccination campaign. Travel outside the UK, on the other hand, remains far less likely, but there is some nuance behind prospects for international travel. For instance, one panel member says that their plans to travel abroad depend more on ‘where’ they go rather than ‘when’. For example, it may be more sensible (in their view) to visit somewhere like Greece—where risks are lower—before Germany or Thailand. 
 
Nevertheless, many within our panel stress that any relaxing of the rules must be done slowly and sensibly. It is noteworthy that these sentiments were recorded before the government’s announcement about their lockdown exit plans. It will be interesting to see whether pension professionals will now become even more hopeful about the prospects of UK-based social activities earlier than June. 
 
In addition to not seeing family or friends until June, the panel adds that we should not to expect to: 
  •  
  • Travel within the UK or go to the pub until July 
  • Attend a family gathering until August 
  • Hold in-person meetings or work from the office until September 
  • Attend in-person events until November 
  • Travel abroad until 2022 

 

The sponsor covenant remains largely unchanged by the global pandemic 

 
The sponsor covenant is unchanged for more than 60% of pension professionals, whereas two weeks ago, less than a third expressed this view. However, when compared to the historical trends in our survey, these statistics can best be understood as a reversion to the mean rather than a new pattern. Since early July 2020, when we started tracking the panel’s views on their sponsor covenant, the proportion of pension professionals who say it is unchanged since the start of the pandemic has hovered just under 50%. 



UK pension professionals are less worried about the government’s approach to the pandemic 

 
Concerns about the British government’s pandemic guidance have been steadily subsiding—there is a notable decrease in the proportion of pension professionals saying they are ‘extremely worried’ or ‘very worried’ over the past two weeks. As of today, only 17% of the panel members feel this way, which is much lower than the 46% recorded two weeks prior. However, this should not suggest that our panel is entirely confident about the government’s handling of the pandemic—on the contrary. 
 
Some counter that the government’s messaging is ‘messy’, whilst others warn about Downing Street’s newfound confidence making officials more prone to repeat earlier policy mistakes. Other members of our panel believe that a successful vaccination campaign is not the end of the story and that we must remain vigilant and mindful of social distancing protocols going forward.



Tax rises are inevitable in the face of mounting public debt 

 
UK pension professionals continue suggesting that tax rates and inflation are both going to rise as a consequence of the pandemic. Some are of the view that tax rises are inevitable since the growing debt will eventually need to be accounted for, with one panellist even implying this might be done through some form of indirect taxation. 
 
Meanwhile, our panel’s views on interest rates remain largely concentrated on the bottom half of the macro rates indices.  As of today, only a third of our research panel predict that interest rates will rise, contrasted by the 58% that said they expect them to remain the same (see chart further below). 





Prepare for an uneven economic recovery  

 
Throughout 2020, our panel believed that the following industries were the most likely to ‘lose out’ as a result of the pandemic: materials, industrials, consumer discretionary and real estate. To date, this sentiment remains mostly stable, with real estate predicted to be the most negatively affected sector. However, sentiment has changed for consumer discretionary, with more pension professionals now ‘neutral’ in their outlook. In fact, more than a quarter of pension professionals now rate consumer discretionary as a winner, while 46% of the panel members’ outlooks are neutral (see chart further below). 
 
This newfound enthusiasm for consumer discretionary echoes industry projections that see growth potential in the space. There is also a growing consensus that the outlook for consumer discretionary will improve as a result of pent-up consumer demand, which will unleash a wave of economic activity once businesses are allowed to re-open.  We will continue monitoring the panel’s sentiment on the economy to see if they adjust their outlooks for other industries in light of the new government announcements.






What industries do you think will recover quickly after businesses reopen? Click here to tell us in our bi-weekly survey. 
 

 

Previous articles in this series: 

 
12/02: High vaccinations rates bring down COVID-19 concerns 
27/01: COVID-19 concerns at an all-time high 
13/01: New COVID-19 strain makes pandemic spiral out of control 
15/12: Another COVID summer on the cards despite vaccine rollout 
02/12: Divergent COVID-19 concerns show different realities 
18/11: The risks and consequences of COVID-19 complacency 
04/11: Sharp rise in COVID-19 concerns before the second lockdown in England 
22/10: COVID-19 outbreak to last at least until June 2021 
07/10: Prolonged COVID-19 outbreak is putting pressure on covenants 
23/09: How will the second COVID-19 wave impact UK schemes? 
17/09: Trust in UK government dwindling due to COVID-19 
26/08: Another step in adjusting to COVID-19 uncertainty? 
19/08: COVID-19 outbreak to last at least until February 2021 
12/08: Trustee sentiment around COVID-19 pandemic deteriorates 
05/08: Relaxed attitudes towards COVID-19 threaten economic recovery 
29/07: Does COVID-19 mean the ‘end of the world as we know it’? 
22/07: COVID-19 could weaken covenants and raise taxes and inflation 
15/07: COVID expectations set, except for economic recovery 
08/07: COVID concerns rise as economic outlook improves - why? 
01/07: Lockdown easing raises COVID concerns 
24/06: The UK government’s COVID-19 guidance attracts criticism 
17/06: COVID concerns shift to life after lockdown 
10/06: Will lockdown easing cause COVID concerns to rise? 
03/06: COVID concerns at an all-time low – is the worst over? 
27/05: Personal COVID concern subsides – but this may be a problem 
20/05: UK pension trustees worry there may be no ‘going back’ after COVID 
13/05: UK pension schemes don’t trust the lockdown exit strategy 
06/05: Concerns over duration of COVID lockdown and macro effects intensify 
29/04: Professional COVID concern spikes by 18% as trustees brace for a longer lockdown 
22/04: Macro effects of COVID to last until 2022, with personal concerns up by 10% 
15/04: COVID concerns fluctuate – there is no path to normalisation in sight 
08/04: The magnitude of COVID’s economic impact remains unclear 
01/04: Have UK pensions schemes settled into the ‘new normal’ of COVID-19? 
25/03: Rising levels of concern about COVID and a changing economy 
23/03: What do pension funds think about the economic impact of COVID-19? 
19/03: COVID-19: Government response divides pensions community 
18/03: 96% of pension funds and trustees preparing for a long-term COVID-19 fallout 
18/03: mallowstreet Flash Insights Report: COVID-19 – what’s on trustees’ minds 

  

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.