Expat pension plans may be wrecked by Brexit effects

Published:  30 Aug at 6 PM
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Expats relying on final salary or defined contribution pension schemes to fund their overseas lifestyles as well as workers planning to retire abroad are facing a post-Brexit double whammy likely to wreck their retirement plans.

In future, pension savers on existing plans will be forced to save more in order to receive the income they were expecting prior to the Brexit vote. Some 75 per cent of pension schemes, including those of British expats working overseas, are now predicted to realise retirement income amounts far lower than the recommended government levels.

City experts are warning a post-Brexit perfect storm of slashed interest rates and weak growth forecasts will spill over into work-related and personal pension payments, making them too low to generate promised income. The new economic assumptions suggest only 25 per cent of plans stand a chance of providing an acceptable level of retirement income, whilst 50 per cent have almost no chance.

Reasons behind the shocking reality include the low yields now expected in the post-Brexit world, with risk-free investments producing little or nothing in the way of returns. As a result, the overall cost of providing personal pensions is expected to soar. In the short time since the referendum result was announced, annuity purchase costs have increased some 30 per cent.

City firms have been focusing on the disastrous effect on final salary pensions of Britain's leaving the EU after the sterling deficits in such schemes increased by tens of billions. The message from the City as regards defined contribution schemes is just as dramatic, in that a huge number of employees will be forced to increase their contributions, work for longer or accept their projected retirement income will be slashed.
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