April 17th, 2019
Brexit – An Update For Our Clients
As you may be aware, the date of the UK’s withdrawal from the EU is now set to take place in October 2019 and although there is continued uncertainty around the terms of this withdrawal, we can update you with regards to the potential impact on your investments, mortgage and protection products.
What effect could Brexit have on my investments?
The actual impact will be dependent on the terms under which the UK leaves the EU. But it is important to remember that all investments can go up and down in value over time and returns are not guaranteed.
Most investments are designed to be held over the medium to long term and we would caution against making any decisions on whether to encash or retain particular investments based on the potential impacts of Brexit alone or any short-term fluctuations in the value of your investments.
In short, no-one can accurately predict how investment markets will be affected by Brexit or what the precise implications will be.
We will, of course, discuss the performance of your investments with you during your next ongoing review with us and we can also discuss any concerns you may have on issues that could affect your investments, such as the impact of Brexit. Where necessary, we will make adjustments to your portfolio, based on your circumstances, preferences and risk appetite.
If you hold money in funds/investments that are provided by a non-UK company that is based within the European Economic Area (EEA) then you should still be able to continue holding these investments even in the event of a ‘no deal’ Brexit. This is because the Government and the Financial Conduct Authority (which is responsible for regulating the conduct of all UK authorised financial services firms) have put in place special measures that will enable these companies to continue offering services to you.
What effect could Brexit have on mortgage interest rates?
The actual impact will depend on the terms under which the UK leaves the EU – in other words whether a deal is ratified or the UK leaves in a ‘no-deal’ scenario.
The Bank of England kept rates unchanged at 0.75% when last reviewed in February 2019, although their forecasts for the next 3 years suggest that rates could increase to around 1.5%. This is by no means certain, however, and will be heavily dependent on the economic climate post-Brexit.
If you are already on a fixed rate deal, any changes to interest rates will not impact your mortgage repayments until the end of the fixed rate period. If, however, your mortgage is currently on variable rate (often referred to as the standard variable rate “SVR” or standard mortgage rate “SMR”) and you are concerned about possible interest rate rises then you could consider switching to a fixed rate deal. If you are coming to the end of your fixed rate deal, or you are currently on a variable rate, we would be happy to advise you on your options if this is an area of concern for you.
Will my protection policies continue to provide me with cover and my mortgage policies continue to run?
Existing insurance protection policies should be unaffected by Brexit. It may be the case that your Insurance Provider is based in the EEA and doesn’t intend to continue to provide new business within the UK. However, this should not affect your existing policies as the UK Regulator of financial services business – the Financial Conduct Authority – has put in place measures to allow existing insurance policies sold by EEA based Insurance Providers to continue.
The continuity of your existing mortgage contracts should be unaffected by Brexit.
Will Brexit affect the consumer protection I receive on my financial services products?
There will be no changes to consumer protection for the vast majority of customers.
The Financial Ombudsman Service settles disputes between consumers and UK financial services firms where these arise. This service will continue to be available post Brexit, meaning that if you have a dispute with a UK based financial services firm that is authorised by the Financial Conduct Authority, you will continue to be able to refer a complaint to the Financial Ombudsman Service (FOS) if a dispute arises. It is also proposed that you will be covered by the FOS for the activities of EEA based firms that provide services into the UK.
The Financial Services Compensation Scheme (FSCS) will also remain available to UK consumers post Brexit. It is designed to deal with claims from (and in the event of a successful claim, provide compensation to) consumers who have previously dealt with a UK financial services firm that has since gone out of business. The compensation limits are per person, per institution and currently set at £85,000 (deposit accounts), £85,000 (mortgages), £85,000 (investments), 100% of a claim with no upper limit (pensions and life assurance) and 90% of the claim (general insurance (e.g. – buildings & contents insurance).
EEA based firms doing business in the UK are not typically covered by the FSCS and instead the compensation scheme in their country of origin will usually deal with any claims against the firm. Brexit could result in a loss of access to these EEA compensation schemes if no deal is reached. This loss of access is dependent on the terms of withdrawal and at this stage, is far from certain.
Will product providers with whom I hold financial services products be updating me in relation to any potential impacts Brexit may have?
You may also receive communications from providers updating you with regards to the impacts of Brexit, although again given that the position is still unclear, they may not be able to provide definitive information. We are more than happy to discuss any questions you may have received from correspondence with any providers and to assist where we can.
If you have any queries relating to this letter or wish to discuss any matter relating to your finances then please do not hesitate to telephone us or click here to arrange a call back.