Britain left the EU on 31 January 2020. At that time, with negotiations set to continue, it was hard to predict the impact that Brexit would have on our personal finances. And then coronavirus arrived.
With the pandemic dominating headlines for most of the year, the Brexit transition period will end on 31 December 2020 as planned, but in a financial climate that no one could have predicted at the start of the year.
So, are we any closer to understanding what Brexit will mean for pensions and investments, or what impact it will have on house prices and the costs of household goods?
The answers to those questions will likely depend on whether the UK leaves the EU with, or without a deal. Whatever happens after 31 December, having a long-term financial plan in place will give you the best chance of riding out the uncertainty and leaving you on course to meet your goals.
The effect of Brexit on your finances is still unclear
With so much depending on the outcome of last-minute talks, and nothing finalised until the transition ends, the impact on your finances isn’t yet easy to predict.
If you are looking to retire to Europe, you’ll almost certainly see an effect on your State Pension. An EU agreement currently in place guarantees State Pension increases to those living in some EU countries, including France and Spain, until 2023.
Whether you’ll receive a State Pension increase if you move to the EU post-Brexit will depend on the outcome of ongoing talks, and any agreements that are reached.
A Canada Life report last year found that 46% of over-50s who planned to retire abroad were reconsidering in light of Brexit.
- Savings and investments
The Bank of England Base rate is at a historic low, with a move to negative rates not yet ruled out. Future changes will depend not just on the outcome of Brexit but on the coronavirus pandemic too.
The choices the Bank of England makes will have a large impact on savers and borrowers but it’s still too early to advise either way.
Something that is likely to remain unchanged is the £85,000 protection offered by the Financial Services Compensation Scheme (FSCS). UK-regulated accounts will continue to offer the protection and you should see little change in this post-Brexit.
The future of health care arrangements for travellers to Europe after Brexit is less certain. Although you can continue to use your European Health Insurance Card (EHIC) for the rest of 2020, reciprocal healthcare arrangements from 1 January 2021 remain part of ongoing discussions.
Ask yourself these three questions
With uncertainty still surrounding the end of the transition period, it’s difficult to predict the financial impacts in the short or medium term. It’s important, therefore, to stay patient and focus on your longer-term plans.
1. Have your long-term plans changed?
Back in March, as coronavirus uncertainty was reflected in the markets, we advised you to remain patient, to not make any knee-jerk reactions, and to stay calm.
The impact of Brexit on your investments is impossible to predict but our advice to you remains the same. Investments should always be made for the long term. That gives them the best chance of riding out periods of short-term volatility and gaining again in the future when markets recover.
Having said that, the closer you are to the end of your desired investment term – be that retirement or the purchase of your first home – the more significant large market dips could prove to be.
Speak to us and we can help you manage your investment, helping you to consolidate your gains so the money is there when you need it most.
2. Has your attitude to risk changed?
Your attitude to risk isn’t a static thing. Instead, it’s constantly changing as your circumstances and aspirations shift. Your investment choices can change with you.
Your risk profile will differ according to the purpose of your investment, how close you are to reaching your investment goal, and your capacity for loss.
By understanding your aspirations and attitudes, we can ensure your investment strategy aligns with your risk profile, whether you’re in an accumulation or a consolidation phase.
Get in touch and we can help to ensure your investments are working for you.
3. Do you need to diversify your portfolio?
Diversifying is a way to spread investment risk.
By investing in different asset classes and sectors across the globe, you are protecting yourself from a sharp fall in one area.
Speak to us and we can advise on diversifying or rebalancing your portfolio.
Get in touch
We are keeping up to date with all Brexit developments to ensure the advice we give you always reflects the latest understanding across the profession.
With so much uncertainty still surrounding the end of the transition period, the short- and medium-term effects are impossible to predict.