With Brexit merely weeks away, apprehension around Brexit and its potential impact is at an all time high.
Commentators have varying views on what impact Brexit will have on the Irish jobs market, consumer and business confidence, and how it might affect personal finances down to the price of a litre of milk.
However, your Brexit risk will depend on the level of exposure you have to the UK market, meaning that the more exposed you are, the more vulnerable you will be to any legislative and regulation changes, fall (or rise) in the pound and changes in share markets.
Now we give you the quick guide to what you need to know about Brexit, how it might affect you, and what you can do about it.
If you have a UK pension
Naturally enough those of you that have worked in the UK and hold a UK pension might be concerned about the impact of Brexit on your pension pot. Many of you may have considered moving your pension to Ireland, but is that really such a good idea?
That depends on your circumstances. You would need to consider the following:
- Are you allowed to move your pension from the UK to Ireland? If so, you need to access an overseas transfer value in British pounds before transferring your pension pot to a Qualifying Recognised Overseas Pension Scheme (QROPS) which accepts retirement savings without a British tax charge.
- Is your lump sum €200,000 or less? If so you might be able to take advantage of a higher tax-free lump sum. Any excess will be subject to tax in Ireland so consider whether it is better left in the UK where it could remain tax free.
- Can you access your pension earlier? In some cases when you transfer your pension to Ireland you might be able to access your pension earlier than the normal retirement age in the UK (but no earlier than age 55).
- Is the transfer value of your pension higher than the British lifetime allowance of £1m? If so it might be subject to British tax, deducted when the transfer takes place.
- What plans do you have for your estate? If you keep your pension in the UK, a defined benefit scheme won’t provide a death benefit entitlement, only a payment for a dependent in the event of premature death. If you transfer your pension to Ireland however, the transfer value, or the pension value at your death is then payable to your estate, meaning your money won’t be liable to British inheritance tax.
Keep in mind that any lump sums of more than £30,000 require you to seek advice from a financial advisor regulated by the British financial regulator, the Financial Conduct Authority, so give your Hennelly Finance advisor a call to help you work through the process.
If you’re considering retirement soon and have funds tied up in a UK pension, it’s useful to explore what options are available to you and what might help offset any upset to the pound.
If you have a UK bank account
If the UK fails to strike a deal, a no-deal Brexit could have serious implications for banking across the border.
If you hold a bank account – such as a savings or other bank account, a credit card, a loan or a mortgage – in the UK (including Northern Ireland), you need to contact your bank urgently to discuss the impact to your banking services in the event of a no-deal.
There is concern that some banking services may no longer be available in the event of a no-deal Brexit thanks to legislation and regulation that may differ between the UK and the EU,
As a result, this has the potential to seriously affect the way you manage your personal finances and/or business.
If you have investments
Any time change looms on the horizon (or just around the corner in the case of Brexit), there can be nervousness about the impact to investments.
Unfortunately without a crystal ball there is no way we can predict what will happen after Brexit – no deal or otherwise, but we do know that as with any type of investment decision you make, uncertainty and risk are always going to play a key role, so it is important to understand your level of risk and discuss your investment strategy with a qualified financial advisor to ensure your strategy is right for you.
If you have investments with a good deal of exposure to the UK and Irish economies you are likely to be more vulnerable to changes in shareholdings or sterling asset holdings.
Never more than now has the diversification of your investments been so important.
The diversification of your portfolio can help you to offset a shake-up to the UK and Irish economies; realistically diversification should form part of your investment strategy regardless of whether Brexit was on the cards or not.
If you are sitting on lump sums held in sterling, you may also want to consider protecting yourself against any further decline in the pound. While we cannot know whether sterling will rise or fall in the wake of Brexit, it is worthwhile limiting your exposure to this ambiguity.
Most importantly, if you are concerned you should contact your Hennelly Finance advisor for a review of your investments to understand your exposure. We can help you take steps to mitigate your risk in accordance with the level of risk you feel most comfortable with. Give us a call on 091 670 123 to come to grips with what Brexit means for you.