Where does Brexit leave pensions?

You will be well aware that the Brexit vote and the subsequent drop in the value of the pound, restriction of the movement of workers, and any changes to worker’s rights are all adding up to make working in the UK less attractive for EU nationals.

You may be dealing with this issue internally, but what about pension fund managers? They have the same issue, so how does this effect their stability and fund performance, and therefore your company pension scheme? Additionally, one of the major pension players is owned by a founding member country, and another is based in Scotland, who could leave the UK in the future – so it’s easy to envisage a major change in the pensions industry in the coming years.

Pension managed funds are heavily reliant on UK plc – so whether it's returns on blue chip shares, gilts, bonds or property, uncertainty will affect returns in the short term, and our success after Brexit will affect it in the long term.

If we do see lower returns then this will mean extra money may be needed to fund pensions. The result for HR could be tighter wage negotiations and the restriction of other benefits and plans.

Any of your employees that are now at or near retirement will be seeing disappointing annuity rates and potentially lower fund values for those considering drawdown. They will be concerned about their future and may look to HR for support and advice. They may also defer retirement, changing your employee models for the coming years. Furthermore, will a decision to retire in an EU country be put on hold, or even be possible, after Brexit?

It is clear Brexit is keeping HR busy but specific issues around pensions need to be addressed with good communication to employees and strong governance of providers and funds.

Tony Nevin is director of employee benefits at Mazars.

This article was provided by Mazars.