Expert Karen Barrett, chief executive of Unbiased, comments on the result of the Brexit vote and how it might affect your money right now.
Much has been said about the potential impact of Brexit on personal finances, but already we’ve had plenty of surprises – some predictions seem to have come true, while in other respects the markets have defied the worst fears. However, it’s still very early days. What you most want to know, as a consumer, is how the Referendum result may be affecting our money right now. This depends very much on your circumstances and the stage of life you’re at. We’ll look at these one at a time:
1. What to do if you plan to retire in the next few years
You may be concerned about the possible impact of the Brexit vote on your pension. However, it’s important to get things into perspective. Your retirement will hopefully be a long time – more than 20 years – and a lot can happen in two decades, regardless of the present circumstances. If anything, the current upheaval is a useful reminder of how carefully you need to prepare and plan for retirement. The unpredictable can and does happen on a regular basis.
The long-term effects of Brexit are still an unknown quantity
This is why it’s so important to seek advice at the outset. Brexit should serve as a warning against complacency and believing things will always stay the same. Retirement planning is about considering all that might happen over a quarter of a century, both in your own life and to the economy in general, and then allowing for those contingencies. Advisers can’t help you predict the future, but they are experts in preparing for it.
2. If your retirement is imminent
The market fluctuations may have left your pension pot looking a bit worse for wear. But the good news is that the retirement process is much more flexible than it used to be. You’re no longer obliged to buy an annuity immediately – or even at all – so you can delay any decisions if it’s practical to do so.
Remember that once you’ve bought an annuity, you’re locked into that value and those rates – like Brexit itself, it’s a one-way door. Therefore you should be sure to seek expert advice before making any retirement decisions.
3. If you’re an investor
If you’re an investor and wondering about the impact of Brexit, you’re not alone. The long-term effects are still an unknown quantity, but the immediate post-result dip will have worried some people. However, the feared crash didn’t happen, and many parts of the market have made a good recovery since.
Again this teaches an important lesson: investing in equities is a long-haul journey, in which short-term volatility should be seen as just bumps in the road. It’s also a reminder that equities are high-risk – if you’ve found the recent downs and ups stressful, then you should perhaps rethink your investment strategy to suit your risk appetite, or ensure that less of your assets are exposed to such levels of risk.
4. If you have cash savings
Cash savings are generally safer than equities or bonds, so are less vulnerable to major events like this one. Although the Brexit vote has lowered the value of the pound, this doesn’t affect the value of your savings unless you’re looking to buy other currencies. However, some items may become more expensive as a result, if they are imported goods.
A longer-term effect on your savings may be yet another lowering of interest rates. If you are hoping to build your money over the long term, it may be time to talk to a financial adviser about exploring alternative investment options.
5. If you’re looking to buy a home
Every cloud has a silver lining, and for this one it may be mortgage rates. It’s widely believed that mortgage rates may fall as a result of the vote, and also that property prices may dip. The latter may be unwelcome news for some, but plenty of first-time buyers may be cheering if that happens.
In general, it’s important to get Brexit into perspective. Nothing has actually happened yet, Britain is still in the EU for now, so when you take away the speculation it is largely business as usual. Financial advice is very important at this time – just as it was last month. If the vote has encouraged more people to seek it now, then that is good news for them.
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