Monumental decision – with pitfalls and plenty of opportunity

LAST Thursday’s vote to leave the European Union has already had seismic ramifications.

Prime Minister David Cameron, who has worked splendidly to keep the UK economy afloat, has announced his decision to leave office. The future of George Osborne, Chancellor of the Exchequer and the Government’s economic enforcer, also looks precarious.

Meanwhile, stock markets have responded negatively, not just here in the UK but across Europe and the rest of the globe, impacting adversely on our pensions and investments.

Credit ratings agency Moody’s has also given its view on a country heading for Brexit – it has downgraded the UK’s credit outlook to ‘negative’ fearing the economy will be impacted adversely by a ‘prolonged period of uncertainty’.

On the surface, the outlook for all of us – young and old – is at best uncertain, at worst worrying.

Certainly, in a career in money journalism spanning three decades, the decision that the country took on Thursday ranks as one of the most monumental events I have ever witnessed.

In financial terms, more breathtaking than either the 1987 stock market crash – when equities fell on Black Monday by more than 10 per cent – or the bursting of the dotcom bubble in March 2000.

Financially, less frightening than September 2007 when Northern Rock savers queued outside its branches to get their money out, fearful that the bank was about to collapse. But more dramatic, I would say, than Black Wednesday, September 1992 when the pound spilt out of the Exchange Rate Mechanism.

This essential 16-page special report has been put together with one purpose in mind – to help prepare you financially for a life post Brexit.

There are opportunities – as well as pitfalls. Savings that can be made – as well as steps you can take to protect the family finances. Simple measures we have written about on a consistent basis in the pages of The Mail on Sunday – but which are now more relevant than ever.

As polymath Benjamin Franklin said: ‘Out of adversity comes opportunity.’ Seize the opportunities.

1 GET IN FINANCIAL SHIPSHAPE

IN AN uncertain world, there is one uncertainty most homeowners can eliminate – and that is the threat of their biggest financial outgoing, their monthly mortgage payment, becoming an even greater burden. The solution lies in a fixed rate mortgage – a tool available to both homebuyers and those who want to stay in their home but cut their monthly bill.

What makes a fixed rate mortgage so compelling – apart from payment certainty – is that rates are currently about as attractive as you are going to find.

Even if the Bank of England resorts to a short-term cut in base rate to ward off an economic downturn, fixed rate loans will not come much cheaper than they are at the moment. If you can, seize a fiveyear fixed rate loan (see page 4 for the best deals). A mortgage broker will help you find one that best fits your financial circumstances.

Other household bills – electricity, gas, phone, broadband – can all be trimmed by shopping around. On Friday, the Competition and Markets Authority said households securing the cheapest energy tariff could save themselves upwards of £300 a year. A plethora of websites, including uSwitch, Confused and Gocompare, can help find you a cut price deal.

2 PROTECT THE FINANCES

PROTECTING the family finances is often not a financial priority. Indeed, research just conducted by insurer Zurich indicates that four in ten workers only have sufficient savings tucked away to last them a maximum three months if they lost their job. With possible job losses on the horizon many families will rightly be concerned how they will meet essential bills if the breadwinner gets the axe.

Insurance cover is available that will help meet regular repayments on bills such as credit cards, loans and mortgages in the event of unemployment.

This is often known as accident, sickness and unemployment cover. It pays out for a fixed period of up to two years but usually only covers min- imum loan repayments. Plans may only cover a specific debt – such as a credit card – while the over-65s will usually be prevented from taking out a policy.

There is often a waiting period, a minimum of one month, before payments are made. But they are worth a look.

Those knowingly at risk of unemployment when a policy is purchased will have a claim declined. They cost between £9 and £13 a month for a 35-year-old office worker needing £850 paid monthly for two years.

Chris Budd, a financial planner and author of The Financial Well Being, says protection insurance – including that paying out in the event of death or long-term illness

– is not for everyone. He says:

‘Reducing the potential impact of a financial shock helps increase wellbeing and reduces stress. But many people are willing to accept a bit of risk and hate wasting money on the unknown. Knowing yourself and getting the balance of your insurances right is crucial.’

3 PUT YOUR SAVINGS AND INVESTMENTS IN GOOD ORDER

LOW interest rates and volatile stock markets are likely to be the order of the day for the foreseeable future.

That means it is going to be more difficult to build long-term wealth – whether inside a pension, taxfriendly Individual Savings Account or a savings account (inside or out- side an Isa). Many investors are going to have to battle-harden themselves against market falls impacting on their investments.

Key is to keep saving and investing – using all available allowances – through thick and (a lot of) thin. That means taking advantage of the annual Isa allowance, £15,240 in the current tax year.

This can be used to save in cash or invest in shares and investment funds. There is also an Isa allowance – £4,080 – for children.

Also don’t forget either the new personal savings allowance which means basic rate taxpayers can earn up to £1,000 of deposit interest a year tax-free – the limit for higher rate taxpayers is £500.

Pension saving should also remain a priority, especially given that the tax relief currently available on contributions may not be here forever.

An overhaul of this generous savings tax incentive was threatened earlier this year by the Government in light of its cost – £20billion net a year – but it was abandoned after a backlash from Middle England.

It will come back on the Gov- ernment’s agenda at some stage e– – probably sooner rather than later. er.

As Tom McPhail, head of retireire-iree ment policy at fund broker Hargreaves Lansdown, says: ‘It’s sa a tempting target if the Government ment needs to trim its spending.’

So make pension hay while you ou can.

Finally, on the savings front, shopping around for the best deals always pays.

Look for an interest rate on easy access deposit savings of at least one per cent. Also, switching bank accounts may get you a better rate of interest – as well as a one-off cash gift.

Accounts from the likes of The Co-op Bank, First Direct, , Halifax, HSBC, Nationwide Buildding Society and TSB are worth rth looking at.

TAKE ADVICE FROM M 4 PROFESSIONALS

INDEPENDENT financial advice comes with no guarantees – and it costs money – but it can prove comforting in challenging times.

Chris Budd, who also runs Bristolbased advice business Ovation Finance, says: ‘Often I will sit down with an investor and through some simple cash flow modelling alleviate any concerns they may have that their money will not last them through retirement. Financial advice is not about selling products. It’s about helping people get to a point where they can live their lives free from any financial stress caused by the likes of last Thursday’s Brexit vote.’

Financial advisers, as in all walks of life, vary in quality. They are often best found through personal recommendation.