March signals the formal start of the UK’s withdrawal from the European Union. Article 50 will be triggered and the long process of leaving begins.
Since last June’s ‘out’ vote the value of the pound has fallen, affecting everything from our holiday cash to business imports.
Meanwhile, interest rates have slumped to new lows while inflation has risen. A February poll of Moneywise readers found 18% of people were worried about savings rates falling further.
After this, pensions an annuities (17%), and travel money (14%) were the next biggest areas of concern. Let’s look at the outlook for each area.
Just when it seemed as if things couldn’t get worse for savers following the EU referendum vote, they did. The base-rate reduction in August 2016 caused rates to tumble even further and today you’ll need one of the top easy-access accounts just to get a 1% return.
However, Anna Bowes, director of comparison website Savings Champion, believes Article 50 being triggered will have little impact on rates and says increased competition is what is needed to help out struggling savers.
She says: “We don’t know how it will play out for savers. But when there are a number of high street accounts paying just 0.01%, where do they go from there?
“The good news is that there are still providers out there paying far more, so it’s important not to leave funds languishing in these appalling accounts.”
Pensions and investments
The FTSE 100 index of the biggest companies listed on the London Stock Exchange has hit record highs in 2017, yet people remain concerned about the value of their investments.
Mel Kenny, a chartered financial planner at Radcliffe & Newlands, says: “This step into the unknown has come across in conversations with clients, paralysing progressive decisions of some.”
He tells clients concerned about Brexit that any risk has already been priced in by the markets and to make sure they have emergency funds set aside, but argues that this is no different to his advice at any other time.
“To stop investing altogether would mean venturing into a potentially even more uncertain world of trying to time the markets, which most get wrong and, what is more, miss out on the dividends that could otherwise been earned – no matter what the markets do,” he adds.
This may seem like a more trivial concern, but the falling value of the pound has caused big issues for people travelling abroad.
At the beginning of February 2016, £500 would have bought a holidaymaker €652 or $712. One year on, and you would get just €580 or $625 for the same amount of money, data from Compare Travel Money shows.
However, Peter Rudin-Burgess from the price comparison site believes the outlook for the pound in 2017 is encouraging. He says major elections in France and Germany, plus the presidency of Donald Trump, could harm the euro and dollar respectively.
“These events are going to weaken the euro and dollar in the short term, which should be good for the value of the pound,” he says. “My opinion is that, as 2017 progresses, the pound will get stronger. The Brexit destination is known and nothing is going to actually change immediately.”
Moneywise verdict: Don’t panic
These are the main issues that Moneywise readers are worrying about with regards to Brexit impacting on their finances. Yet despite these concerns, 34% of readers say Brexit gives them no financial fears at all.
Perhaps this confidence is shared by the wider economy. The UK grew by 0.6% in the fi nal quarter of 2016, above the expectations of city analysts. For now, little seems certain – apart from there being a few more bumps in the road before the UK finally leaves.