Tag: savings

Goodbye 2020… Hello Brexit!

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.

 

Stay Safe!

How safe is your cash post Brexit?

The impact of Brexit on Financial Services and the FS Compensation Scheme

As we stand right now (December 2020) The UK is leaving the European Union (EU) on 31 December 2020. EU law will continue to apply to the UK financial services regulations through the existing agreement for UK firms to do business throughout the EU without obtaining further financial services authorisation (something known as Passporting) until then. 

Passporting has allowed firms authorised in the European Economic Area (EEA) to conduct business within the EEA based upon member state authorisation. The FCA has given guidance to firms that we should NOT expect these current arrangements to remain in place once the transition period ends on 31 December 2020. As current negotiations regarding a trade deal never included any discussions regarding financial services, you should assume that any financial interests you may have abroad, will no longer be protected by the FSCS once passporting arrangements between the UK and the EU end.

You may need to take action, in order to be ready and protected following Brexit. Which is why I have outlined a number of likely scenarios that UK customer with funds invested in EU jurisdictions may be facing. Obviously this also applies to EU citizens with funds invested in the UK.

Either way, there are things you may wish to consider to ensure that you and your money remain protected from 1 January 2021 onwards. 

Financial Services Compensation Scheme post Brexit

The FSCS is there to provide protection and compensation to customers or investors of authorised financial services companies that fail or go out of business.

For UK based customers of firms authorised in the UK, the FSCS will not change post Brexit. However, for customers and/or firms based in the EEA (including Liechtenstein, Norway and Iceland) there maybe changes to the protection and compensation available. 

Deposit Protection with the FSCS

Protection via the FSCS will depend upon where the firm in question is authorised and which jurisdiction the firm uses to hold your deposits. My advice is to check with the firm for more information. In order to find where a financial services provider is based or authorised, the Financial Services Register is a good place to start,

Any deposits held in a UK branch of an EEA bank will be covered by the FSCS and your funds will be protected up to £85,000 post Brexit.
Deposits held in UK branches of firms based in Gibraltar are seen differently and are not covered by the FSCS; and will continue to be the responsibility of the Gibraltar Deposit Guarantee Scheme.  

Deposit Protection outside of the FSCS

At 11pm GMT on 31 December 2020, any FSCS deposit protection for funds held in EEA branches of UK firms will cease.

Although there should be an automatic transition to protection provided by an EEA deposit guarantee scheme. However this will be dependent upon the specific rules that apply to each EEA jurisdiction. Any change in, or loss of, protection should be notified to customers by firms prior to this date, but it’s always worth being proactive and checking things out yourself. 

Post Brexit, anyone with funds in EEA-authorised firms within the EEA will see no changes in their current deposit protection, as laid out in the EEA deposit guarantee scheme. 

Further information is available by contacting the firms in question, or visiting www.efdi.eu/full-members for a full list of EEA deposit protection schemes. 

Investment protections covered by the FSCS

If you are currently a UK based customer of an EEA authorised investment firm that operates within the UK, then you are currently protected by EEA compensation schemes.  Following Brexit, the protection that the FSCS provides will be extended to customers of EEA firms with UK branches; in the same way that cover is currently provided to customers of UK firms.  

However, it’s important to note that all customers of EEA authorised firms without a UK branch will no longer have access to the FSCS. The only exception is where there is already established FSCS cover for the operations and activities of certain fund managers. If you are in any doubt, my advice would be to contact your provider and find out for sure if your investments are covered by a relevant compensatory scheme.

Whether you live in the UK or the EEA,customers of a UK branch or of a UK authorised investment firm, will continue to benefit from the protection provided by the FSCS pre and post Brexit. This is because the FSCS has no residency requirements in order for investors to qualify for cover.

Investments no longer covered by the FSCS

If you are a customer of a local EEA branch of an existing UK authorised investment firm then you may not be protected by the FSCS post Brexit.

It is probable that the FSCS will not protect customers of defaulting (insolvent) EEA branches of UK authorised firms after 31 December 2020.

However, you may be protected by the local jurisdiction’s investor compensation scheme, but it may not provide the same protections as the existing FSCS scheme (up to £85,000 of cover). If you are in any doubt, please contact the provider and seek clarification prior to the Brexit deadline.

As always, if you have any questions regarding current FSCS protections, or if you have any questions regarding any aspect of your finances, 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.

Stay safe