What coronavirus means for your money

The spread of coronavirus doesn’t just affect our health – it’s having a big impact on our finances too.

Stock markets have plummeted as the number of those infected with the virus continues to rise, and there are growing fears that we could already be in a global recession.

But what does all this mean for the pound in your pocket, including your pension and investments? Here’s what you need to know.

Work and employment

The Chancellor confirmed in the Budget that employees who are unable to work due to coronavirus will be able to claim statutory sick pay from day one, rather than the usual day four. It can be claimed if you’re self-isolating even if you haven’t yet got any symptoms. If this applies to you, you’ll be able to get a sick note by calling the NHS helpline on 111. Click here to access the 111 service online.  Employers have been told to be “flexible” if they need evidence, as their employees might not be able to produce a sick note if, for example, they’ve been told to self-isolate for more than 7 days.

You must earn at least £118 a week to qualify for statutory sick pay, which is currently set at £94.25 a week. Employers can choose to pay more than this if they want to. Find out more in our article Benefits if you have a health issue or disability. Businesses with less than 250 employees will be able to get a refund to cover the cost of providing two weeks of statutory sick pay to staff affected by coronavirus.

The self-employed, who aren’t eligible for statutory sick pay, should be able to claim benefits more quickly and easily, with those on contributory employment and support allowance able to claim from day one instead of the usual day eight. The Chancellor has also temporarily removing the minimum income floor for Universal Credit.

In measures announced on Tuesday, the Chancellor promised to make available £330 billion in loans to support businesses during this period. He also said business rates on commercial premises will be waived this year for businesses in the retail and hospitality sector. Companies who work in business premises with a rateable value of between £15,000 and £51,000 will be able to apply for grants worth £25,000, whilst the UK’s smallest 700,000 businesses will also be eligible for cash grants of £10,000.

It’s too soon to tell what the full short term, and longer term impacts will be on the country’s work and employment situation. We are starting to hear from members who are having interviews pushed back or cancelled, or those who are self-employed, or on a zero hour contract who are already starting to feel the pain of being offered less work. It’s certainly an incredibly difficult time for many and you can find out more in our article Coronavirus – how it is impacting the job market?

Given current uncertainty, there is no harm in starting to make small incremental savings where at all possible to help build up a financial buffer. You can explore ways to do this in our article ‘How to build an emergency savings buffer’.

If you are looking for ideas on how to supplement your earnings you could read our guides on 21 ways to boost your income and  Five ways your home could make you money and Popular side hustle ideas that can help you earn some extra cash.

Travel and insurance

If the travel ban has affected your holiday arrangements, your travel provider should contact you and let you know the options open to you.  If they’re able to, they can offer you an alternative holiday, but you aren’t obliged to accept this and should be able to get a full refund of the package price if you’d prefer. 

Always check the FCO’s latest travel advice if you’re considering making any before your future travel plans.

As far as travel insurance goes, if you already have got insurance and the travel ban now means you can’t FCO advises against travel to your destination, you should be covered.d, so always make sure you buy insurance as soon as you book a break. If you’re thinking about buying cover for future trips, many travel insurers, including Admiral, Churchill and Direct Line, have stopped offering travel insurance to new customers due to the pandemic, whilst others say new policies won’t cover claims in relation to coronavirus. If your destination area has been listed as an area you shouldn’t travel to before you buy your policy, your insurer won’t pay out.

Sally Jaques from comparison site GoCompare.com’s travel insurance arm said “Travellers already in travel restricted zones and trying to leave will continue to be covered by travel insurance, whereas anyone actively trying to travel to these areas or any other area which has a travel restriction imposed by the FCO would now risk invalidating their travel policy. If you’ve booked a trip and now want to cancel it, then you may find your insurer won’t refund you if there’s no warning on travel to your destination.”

Coronavirus is also having a big impact on travel companies and airlines, with Flybe recently becoming its first high-profile UK business casualty.

Those who’ve booked flights with Flybe will have usually bought flights only, which means they won’t be covered by ATOL Protection, as this only covers package holidays if an airline goes into administration.

However, if you booked your flights with a credit card and the flight cost £100 or more, then under Section 75 of the Consumer Credit Act, your card provider should be able to refund the cost of your ticket, so contact them to make a claim.

If you paid with a debit card, or your flight cost less than £100, you may still be able to claim your money back using a ‘chargeback’ process which could enable your card issuer to provide you with a refund. This process is not as clear cutblack and white as the use of Section 75 in the Consumer Credit Act, so there are no guarantees that your issuer will be able to recover the money through chargeback but it could still be worth a try. Find out more about how chargeback works here.

Interest rates

The Bank of England’s Monetary Policy Committee cut interest rates by half a percentage point to 0.25% earlier this month and then again last Thursday to just 0.1% to help alleviate the stress on the UK economy. During ‘normal’ times, reducing interest rates can help stimulate growth as it makes it cheaper for people to borrow money.

The interest rate cut is great news for those on tracker mortgages which follow the Bank of England base rate, as they will benefit from lower monthly payments. However, some tracker deals have a minimum floor below which the rate cannot fall. Homeowners on other types of variable rate mortgages, such as discounted or capped rate deals, or who are on their lender’s standard variable rate, should also see their payments reduce, although this will be at the discretion of their lenders. Those on fixed rate mortgages won’t see any change in their monthly payments.

The Chancellor has announced that homeowners struggling to cover their mortgage costs due to a loss of income will be able to defer payments for three months, so  it’s worth talking to your lender as soon as possible if you think you’re going to need help. 

News that interest rates have been cut is much less welcome for savers, many of whom are already struggling to find returns that can keep pace with inflation. Savings providers are likely to reduce their rates in the day and weeks to come, so keep a close eye on your returns. If you have a fixed rate savings account, then your rate won’t change.

Petrol and diesel prices

Oil prices crashed on Monday, with the price of Brent crude seeing its biggest one-day drop since the Gulf War in 1991. Last week the price of Brent crude was $52 a barrel, but an international row between Saudi Arabia and Russia, two of the world’s biggest oil producers, saw it fall to less than $35 by Monday morning.

Lower oil prices are good news for motorists, who are already benefiting from lower fuel prices, with data from RAC Fuel Watch showing that February saw some of the biggest monthly reductions in the price of petrol and diesel since the start of 2000, even before yesterday’s significant drop in the price of oil. Simon Williams, RAC fuel spokesman said; “The oil price has slumped due to the spread of the coronavirus prompting fears of slower global demand.”

You can search for the cheapest fuel prices in your area at Petrolprices.com, which has data for nearly 8,500 petrol stations across the UK. The site claims that the average user saves £200 a year by always locating the cheapest places to buy fuel.

Pensions and investments

Headlines such as ‘Billions wiped off shares’ and ‘Shares plunge in worst day since financial crisis’ are understandably deeply worrying for those with investments and pensions, which are usually invested in a mix of shares, bonds and property.

Whilst it might be tempting to sell your investments altogether, it’s rarely a good idea to make panic decisions with long term investments. Selling your investments now would mean turning paper losses into real ones. It’s also worth noting that while shares may have had a particularly bad day, the value of bonds and gold actually surged. This acts as a great reminder of the importance of having a balanced and diversified portfolio – to mitigate the impact of ‘black swan’ events such as this.

Many experts advise taking a long-term five to ten-year view rather than panic-selling, but that can be easier said than done if you’re just about to retire and you’re watching the value of your investments decrease rapidly.

Helal Miah, investment research analyst at stockbroker The Share Centre, said: “What do investors do from here? For most it probably is too late to panic. For investors who have structured their portfolio well, then the only thing to really do is sit tight. Markets will recover over the medium to longer term which is what investors should be targeting as trying to be active in choppy markets could cause even more damage.”

If you’re not sure what to do with your investments, or you’re worried about recent developments, you’ll need to seek professional financial advice. You can find a local financial advisor on VouchedFor or Unbiased, or for more information, check out our guides on How to find the right financial advisor for you.

Energy bills

Any impact of the oil price crash on energy bills is likely to take time to work through to gas and electricity prices, so don’t expect to see cheaper costs imminently.

Will Owen, energy expert at comparison site uSwitch.com said: “People will start to use less energy anyway as we head towards warmer temperatures and lighter evenings through the spring, so households may not notice any major differences until next winter.

“Even then, the oil price drop will only work its way through the system if it’s prolonged and starts to depress the wholesale prices which energy suppliers pay for gas and electricity on the open market.”

Even if lower prices don’t kick in for a while, it’s still worth looking at ways you might be able to reduce your energy costs. Find out more in our article Save money on your energy bills.

Impact on the pound

The pound fell to a five-month low against the euro on Monday, but strengthened against the dollar, making it more expensive to buy goods in Europe, but cheaper to purchase items in the US.

Experts predict greater volatility ahead. Phil McHugh, chief market analyst at Currencies Direct, said; “While no nation around the globe is safe from the impact of coronavirus, the UK faces a unique double-threat when taking into account the risks posed by ongoing Brexit-related uncertainty.

“In the best-case scenario (minimal impact from coronavirus and a swift resolution to Brexit negotiations) we predict the value of the pound rallying by 6-8%. However, a worst-case scenario outcome – namely, extensive global disruption caused by coronavirus, Bank of England base rate cuts and no post-Brexit trade deal agreement – the pound may plummet by as much as 10% from current levels.”

If you’re planning to transfer money overseas, it’s a good idea to use a foreign currency specialist such as TransferWise or World First, as their exchange rates will usually be much more competitive than those offered by high street banks.

If you’re worried about the value of the pound falling further, and you’re planning to make a currency transfer in the next few months, you might want to look at ways you can protect yourself from exchange rates moving against you.

Some foreign currency specialists offer a range of tools which can protect you from negative currency rate fluctuations, including ‘forward contracts’. A forward contract effectively allows you to lock into a favourable exchange for up to two years and means that should the exchange rate worsen you won’t be affected. However, if it improves, you will still be obliged to complete your contract at the agreed rate.

Remember…

The coronavirus situation is evolving so rapidly that it’s impossible for anyone to say with certainty at this stage what the full financial fallout will be.

Whilst it might be difficult to stay calm, it’s important to remember that the UK has experienced – and weathered – many financial crises in the past.  It’s rarely a good idea to panic, so try to avoid staring at the constant news feed all day. This can be helpful in enabling you to take a longer term view, and will certainly help your mood!   Remain focused on your long term plans and seek professional advice if you’re worried.

Are you concerned about the impact of coronavirus on your finances? If so, we’d be interested in hearing from you. You can get in touch via [email protected] or post on the Rest Less Community forum.

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