Expat pension schemes well prepared for Brexit chaos

Published:  14 Oct at 6 PM
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Over 50 per cent of pension schemes are now considered safe from the after-effects of Brexit.

A major concern for British expats living overseas has been the Brexit effect on their pension schemes, but the majority of schemes recently surveyed are well prepared for any fall-out. Just 20 per cent of the total numbers of providers believe Britain’s exit from the European Union may cause an increase in red tape and additional costs, with over half of existing schemes having taken measures to mitigate any risks.

As previously announced, British expatriates in Europe drawing the state pension will receive annual uprates until 2023, but subsequent decisions will rest on reciprocal arrangements with individual EU member states. As regards the loss of access to private pensions and other services in the case of a no-deal Brexit, providers belonging to the Association of British Insurers have taken steps in preparation for such a scenario, according to the Pensions and Lifetime Savings Association.

For workers coming up to retirement age, the PLSA is reassuring clients that 90 per cent of its members’ trustee boards have factored in the possible Brexit effect on their schemes as regards their sponsoring employers. However, some members have voiced concerns about companies’ capacity to support the results. Just under half are concerned leaving the European Union may well bring on a negative effect on employer covenants, but the same percentage believe admin costs won’t be affected.

Moves to reduce risks include reviews of asset allocation, hedging of non-currency risks changing asset allocations and a review of covenants, but most members believe the effects will concentrate on sponsoring employers rather than on the schemes themselves. For example, hold-ups at ports may well affect import and export companies, weakening their economic positions, with robust supply chains essential for mitigating the Brexit effect. A recent PSLA poll was centred on 71 schemes involving final salary funds providing a guaranteed post-retirement income, with defined contribution pension plans also under the microscope.
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