Torrent of inquiries expected over impact of independence on savings and markets, writes Jeff Salway
FINANCIAL advisers have called for calm in the event of a Yes vote in this week’s referendum as they brace themselves for a deluge of inquiries from people worried about the effect on their finances.
Advisers across Scotland have reported a sharp increase in queries already from clients anxious that the result could have serious implications for their investments, pensions, savings and mortgages.
Many Scots have already taken action in response to the currency and stock market volatility which followed the publication of polls confirming that the race would go to the wire.
“Some clients have asked whether they should consider moving their cash deposits to a bank registered in England,” said Paul Lothian, director at Verus Financial Planning in Dundee. “Others have asked whether they should come out of the market into cash until after the referendum. My advice has been simple – don’t panic.”
Savers and pension investors have been seeking answers over the longer term policy outcomes too, according to William Hunter, director of Hunter Wealth Management in Edinburgh.
“They have already been asking lots of questions about New Isas, taxation, regulation, compensation schemes, currency risk, central bank concerns and a potential fall in bond funds,” he said.
“Clients have already been asking what they should do with funds exposed to UK government bonds and Scottish (and UK) companies.”
They also want reassurances that the various financial safety nets will be available in the event of another crisis, he added.
Nothing changes in that respect – people in Scotland will remain covered by the main protection arrangements whatever happens. The Financial Services Compensation Scheme (FSCS) – which covers deposits up to £85,000 per institution – has reiterated that it would continue to protect people in Scotland throughout any post-Yes vote transitional period.
Since it was established in 2000, the FSCS has paid out more than £210 million to some 28,000 people north of the Border. It admitted that the future shape of deposit protection in an independent Scotland was unclear, with the Scottish government preferring a sharing arrangement but also prepared to set up a standalone version if necessary.
But the provision of protection schemes is an obligation under EU law, which requires countries in the EU to cover depositors up to the current limit of ¤100,000 (£78,000).
That also applies to the Pension Protection Fund (PPF), which pays out to final salary scheme members whose employer has gone bust. Nearly 18,000 people in Scotland receive pension payments through the PPF, with another 9,000 north of the Border protected by the PPF-run Financial Assistance scheme.
Yet Graeme Mitchell, managing director of Galashiels-based Lowland Financial Planning, suspects that anxieties over financial security will still surface in the event of a Yes vote.
“There is probably nothing to worry about, but people do worry and take fright in uncertain times – there was deposit protection in 2007 and that did not stop a run on Northern Rock,” he said. “But I suspect that the latest announcements by the major banks will have taken much of the wind out of that problem.”
While currency and stock markets are likely to respond negatively to independence, investors have been told to sit tight and avoid knee-jerk reactions to any volatility following the referendum.
“I suspect people are concerned at what a Yes vote may mean for the value of their investments – will they fall on a Yes vote? I suspect they will, because uncertainty is never welcomed by the market,” said Carl Melvin, director of Renfrewshire-based Affluent Financial Planning. “Values will recover, but fear of the unknown will cause people to consider cashing in funds and so on. We shall endeavour to reassure them that good investments remain good investments even if the vote is Yes.