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Brexit Update

Posted on: 27th Feb 2019 by: CamOuse Financial Management Limited

As you may be aware, the date of the UK’s withdrawal from the EU is fast approaching and although there is continued uncertainty around the terms of this withdrawal, we are writing to 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), £50,000 (mortgages), £50,000 (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. 

Tags: General Information,


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CamOuse Financial Management is authorised and regulated by the Financial Conduct Authority.

None of the information contained in this website should be considered as personal recommendation and is for information only. Should you wish to make a financial transaction we recommend that you take personal financial advice after a thorough review of your personal and financial circumstances.

The information contained within the website is subject to the UK regulatory regime and is therefore primarily targets at customers in the UK.

Registered address: Unit 111, Lancaster Way Business Park, Ely, Cambridgeshire, CB6 3NX

Registered in England and Wales. Registered No: 5662116.

Peninsula: Accredited Standard

Understanding the true cost to your business

Pension arrangements must be available for all employees. There are three categories of employee:

Eligible

Aged between 22 and State Pension Age (SPA) with qualifying earnings over the Auto Enrolment earnings trigger

Non-eligible

Aged between 16 – 74 with qualifying earnings between lower threshold and the Auto Enrolment earnings trigger
 
Aged between 16 -21 or SPA – 74 with qualifying earnings over Auto Enrolment earnings threshold

Entitled

Aged between 16 -74 with earnings below the qualifying earnings lower threshold

Important Notes

  1. Eligible jobholders must be auto-enrolled
  2. Non-eligible jobholders are allowed to be auto-enrolled if they want to
  3. Entitled workers are entitled to join a pension scheme, but the employer doesn't have to contribute

Qualifying Earnings lower threshold

£5,772

Qualifying Earnings upper threshold

£41,865

Automatic Enrolment earnings trigger

£10,000

Minimum contribution level options:

8% of Qualifying Earnings of which

3% is employer's (starting at 1%)

9% of Basic Salary of which

4% is employer's (starting at 2%)

8% of Basic Salary of which

3% is employer's (starting at 1%)

(Where basic salary is at least 85% of total earnings)

7% of gross earnings of which

3% is employer's (starting at 1%)

Pay reference period

Essentially the frequency that the jobholder is paid e.g. monthly, weekly etc. but with reference to the tax month, week etc. therefore it may not be the same as the payroll period.

Deduction and payment of contributions

It is the employer who is responsible to calculate, deduct and pay all contributions to the AE scheme. NOTE – the first and last contributions are likely to be for less than a full pay reference period and should be adjusted accordingly.

Payroll services

It can be seen that it is very important that the payroll system synchronises with the AE scheme otherwise the employer will not be carrying out all requirements and then penalties will be incurred.

Staging date

Based on the employer’s payroll size as at 1 April 2012 and can be found at www.thepensionsregulator.gov.uk/employers using your PAYE reference. The Qualifying Workplace Pension Scheme must be registered with The Pensions Regulator within 4 months of the staging date.

Compliance and communication

Postponement

Auto-Enrolment can be postponed for up to 3 months:

  • For current eligible employees
  • For workers that meet the criteria in the future for the first time e.g. avoid joining temporary or lower paid workers

Opt-Outs

All eligible employees must be auto-enrolled, but can, with the correct notification, opt-out within one month of joining the scheme and be treated as never having joined. They can opt back in and will automatically be auto-enrolled every 3 years in any case!

Communication

There is a wide range of information that must be provided to all employees at certain times, such as:

  • The date auto-enrolment took place for eligible jobholders
  • That non-eligible jobholders have the statutory right to opt in
  • Entitled workers have the right to request the employer to enrol them into a pension scheme

Salary sacrifice

Contributions can be paid by effectively reducing salary, which saves on NI contributions, but employee must choose to do this – they cannot be forced, so a contractual variation will need to be implemented.

Default investment fund

Investment Options

All eligible employees will be automatically invested into a default investment fund, which is a balanced risk fund that is “life styled” to account for the employees approach to retirement. They also have the option to invest in a wide range of funds of their choosing.