InvestmentsApr 22 2016

The government: one year report

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The government: one year report

In a recent poll conducted by YouGov, 40 per cent of the electorate wanted to remain in the UK, 37 per cent wanted to leave and the remaining 23 per cent did not know or would not vote. The poll conducted in March also highlights that people often decide how to vote much later in referendums than in general elections, and referendum polling is often far more volatile than general election polling.

The YouGov posed several questions, the results of which are shown in Charts 2 and 3. On the topic of whether Britain would be economically better off or worse off if it left the EU, 31 per cent said it would be worse off, while only 23 per cent believed it would be better off.

The uncertainty has had an impact on both the economy and politics. Economically, the risk of uncertainty along with the slowdown of the global economy has hit the pound, making it weaker than it was last year.

“We think this is going to continue until the June 23 referendum,” says Mr Stubbs. “I think there will be significant volatility in sterling and that will probably feed over into some of the credit markets as well. Then who knows what happens after that referendum?”

The Bank of England has warned that the vote on the UK’s membership of the EU poses risks to economic growth. Concerns about a possible Brexit have had an impact on the pound and are also likely to delay some spending decisions and depress growth of aggregate demand in the near term, the bank said.

UK retail market

The past year has seen a number of changes in the UK personal finance market; 2015 was also the year of pensions freedoms. According to the new rules, people can withdraw their entire pension from age 55, with the first 25 per cent tax free and the remaining 75 per cent taxed at the saver’s marginal rate.

While the move was welcomed by many retirees, some of which decided to use their pots for such things as kitchen renovations and paying off debts, frequent changes in the pensions market have been a concern for advisers.

“I am worried about further pensions changes going forwards,” says Rowena Griffiths, a chartered financial planner at London-based Female Financial Management. “I think pension freedoms should make pensions more attractive to the younger generation, but I think the pace of change is too slow. I struggle to understand some of the current issues, such as the tapering of the annual allowance for high earners.”

She says her fear is that confused clients will not buy into pensions, asking, “Whatever happened to ‘pensions simplification’?”