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’?”
Housing is another area where the government has been working hard to get everyone who wants to buy a home on to the property ladder, announcing initiatives including the Help-to-Buy Isa last year. In its Autumn Statement, the government doubled the housing budget to £2bn a year along with a promise to build 400,000 more affordable homes.
Furthermore, the government announced a 3 per cent surchange on stamp duty on the purchase of additional properties such as buy-to-lets and second homes.
However, advisers believe a lot more needs to be done to enable more people to buy their own homes. “There is such a massive housing drought throughout the country, which is pushing up prices artificially higher,” says Nick Green, a Coventry-based financial adviser. “Without some large-scale house-building there is no end to the shortage, as sellers will not move out of their property since there is nothing to move to.”
Looking ahead
While a lot is dependent on the result of the EU referendum, analysts expect the government to focus on areas such as infrastructure and education to ensure other drivers of the economy are progressing.
