As we say goodbye to 2020, we usually look back and take stock of the events that have unfolded in the last 12 months. Well, I think we’ve all had a pretty miserable year, so let’s look forward instead. But let’s do that with this maxim in mind…
Plan for the worst, but hope for the best!
This particular piece of wisdom comes from Maya Angelou’s book “I Know Why the Caged Bird Sings.” With the actual quote being
“Hoping for the best, prepared for the worst, and unsurprised by anything in between.”
Which seems incredibly apt considering what we’ve been through and what we currently face.
With this in mind, this article concentrates on what the new Brexit deal might specifically mean to your finances. So once you’ve read this, hopefully you’ll be ‘unsurprised by those things in between’.
A flying start to your holiday?
The one massive ray of sunshine gleaming down the tunnel, is the vaccination program that should see us all safely immunised against Covid-19 by around Easter. This of course opens up foreign travel and holidays once more. So if you’re worried about the effect Brexit may have on the value of your pound abroad, then there’s a simple strategy you can follow to help reduce the impact of Sterling possibly dropping in value.
It’s important to remember that no one knows what the effect on the pound will be. It could end up stronger, weaker or it may stay the same. However, if you’re worried about it’s value against foreign currency for upcoming holidays, then follow this strategy. Purchase at least half of what you need at the best rate you can find today. Then get the rest nearer the time of travel.
Your European Health Insurance Card (EHIC)
EHICs will remain valid until their expiry date with a new and similar Global Health Insurance Card eventually replace the old EHICs.
Currently your (EHIC) entitles you to the same treatment as the locals are entitled to throughout the EU and includes Switzerland, Norway, Iceland or Liechtenstein.
It was expected that the EHIC cover would end after Brexit. However things aren’t as bad as we all expected. If you are a UK national, then you can continue to use your EHIC card in the EU, until it expires, which may be years away. However, you will not be able to use your EHIC in Switzerland, Norway, Iceland or Liechtenstein, as they are not part of the EU.
Once your EHIC card expires, a Global Health Insurance Card (GHIC) will replace it, but you must apply for this new card. Holders of the GHIC will be entitled to emergency or state required medical care for the same cost as a resident in the EU country. Again your GHIC will not cover you in Switzerland, Norway, Iceland or Liechtenstein.
£85,000 Financial Services Compensation Scheme (FSCS)
Any deposits you have with UK regulated banks will still be protected for up to £85,000 per person per financial institution, under the current FSCS protections.
It’s been widely reported that Financial Services has yet to be negotiated and is not included in the current Brexit deal. Which means that much of the UK’s financial service’s legislation comes from EU directives, with the FSCS continuing post-Brexit and post the transition period.
There are no significant changes expected to the FSCS, with the only thing that might alter being the amount covered. This is because EU rules state that all member states must provide €100,000 protection and currency fluctuations may cause changes in the current UK amount of £85,000.
Expat Pensions and Bank Accounts
The current system known as ‘Passporting’, where any UK or EU financial firm (including those in Norway, Liechtenstein and Iceland) can offer their products and services to UK customers and Expats has now stopped.
If you are an Expat, this means that UK IFAs can NO LONGER advise you based upon their UK authorisation. As they now have to also hold an EU authorisation.
If you are an Expat with a UK based Private Personal Pension or bank account, you may also have a problems obtaining service and advice, due to the failure of the government to negotiate any aspects of Financial Services during the recent trade deal.
Single Euro Payments Area (SEPA)
Post Brexit the UK will remain part of a key Euro payments system. Which means that payment service providers based in the UK will still have access to the central payments infrastructure such as SEPA. So those of you who wish to make cross border payments will be able to continue doing so, at the current low costs or free of charge where applicable.
Slightly closer to home – your Mortgage & Savings rates
One happy or sad result of Brexit, depending on whether you’re a mortgage customer or a saver, is that the Bank of England dropped interest rates to 0.25% following the EU referendum result, in the hope of holding off a recession.
Right now, because of the pandemic it’s at its lowest rate ever, at just 0.1%.
It has been reported that the Bank of England recently did an exercise with UK banks to check they could cope with negative interest rates; and there’s little doubt that, even with our new deal, Brexit is likely to fuel this further.
However, even if the short-term impact of negative interest rates is detrimental to the economy, it pales into insignificance when we stop to count the financial cost of fighting the pandemic.
As always, rather than second-guessing the shifting economic sands, it may be better to simply focus upon your own personal circumstances. Make sure that you have the best mortgage and savings rates possible and hopefor the best, prepare for the worst, and try not to be surprised by anything in between.
As always, if you have any questions regarding any aspects of your finances in general, then please don’t hesitate to contact one of our team at Bridgewater Financial Services; where one of our independent experts will be on hand to help in any way.