Brexit – And Your Personal Finances

Well, did you really expect me to write about anything else this month! I will avoid make any predictions, especially as I am writing this some 4 weeks before you will be reading it – ah the benefit of hindsight!

Firstly, we are all affected financially by the decision. This might be through businesses we run, the mortgage rate we pay, the value of pensions and investments, interest rates, the cost of goods in shops; produced in the UK or imported from overseas or simply the rate of exchange for spending money on holiday.  Going forward in addition to the above, we will have to see what happens to inflation and taxation as well. Undoubtedly we are in uncharted waters and it will take months, maybe even several years for the full implications to be recognised. Financially, these implications may be positive or negative or most likely a combination of the two. However one thing for sure was that looking at the value of sterling and the global stock markets just one day after the vote on 23rd June, was never going to sufficiently justify whether Brexit was a good or bad idea and yet many people did!

Interest rates, inflation, stock market values and the value of sterling will all continue to change over the next year or two and be influenced by Brexit negotiations, further decisions taken by the remaining countries in the EU and also how the UK economy does. However one should remember that ‘uncertainty’ is not a new concept. In financial terms, life goes on but we all need to be mindful that the Brexit issue will influence our decisions  for a year or two and perhaps considering your circumstances and where appropriate, taking advice well in advance of when you need to make a decision is a good idea. Here are a few examples:

If you have a mortgage, maybe now is a good time to consider your options? You may be on a variable rate and might now be more inclined to consider switching to a fixed rate. The general opinion is that interest rates will now remain lower for longer, however for many the security provided by a fixed rate is important.  

If you are looking to retire in the next year or two, then the value of your pension(s) needs looking at especially as you get closer to your retirement date. Interest rates and annuity rates, often used to provide an income in retirement, might be affected so you may want to consider all of your options in providing income in retirement.

If you have endowments maturing in the next year or two or Investment ISA’s, you need to consider where they are invested. These investments may be earmarked for any number of reasons from school fees, to a new car, or an extension at home and therefore reducing the volatility in value might be really important.

Maybe the need for an emergency fund – an amount of accessible money you can turn to in the event of the unexpected happening, has increased.

This might be the motivation for considering how much you have in cash deposits. If interest rates do remain lower for longer, while this will be good for people with a mortgage it will be bad for savers, especially if we start to see an increase to inflation.

Please be aware that none of the above constitutes financial advice. We recommend that you consider your arrangements and circumstances and then take advice.

Author: Phil James, Grosvenor Consultancy Ltd

There are advantages and disadvantages to using all of these strategies and they depend on individual circumstances so don’t take action without seeking competent advice. Tax rules, rates and allowances are all subject to change. The Financial Conduct Authority does not regulate tax advice and some forms of offshore investments. The value of investments and the income from them can fall as well as rise and you may not get back the full amount you invested.

The information contained within this document is correct as at 2015/16 tax year and are based on current government legislation. These can change.

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