Guest Comment: Brexit - the elephant in the room

Written by Pensions Policy Institute director Chris Curry

Brexit: What does it mean for private pensions? Let’s talk about the elephant in the room.

This is a question the PPI have often been asked, but have so far not had the available evidence to answer. It is very difficult to say what Brexit means for anything, until we are a lot clearer about what Brexit actually means.

Potentially the biggest impact on private pensions is not necessarily on the administration, or rules surrounding payment, or even the tax treatment of private pensions across borders.

The biggest impact will be from the investment performance of pension funds, which is linked to the performance of the UK and EU economies, as well as the economic performance of the rest of the world.

The performance of UK pension funds is linked to the UK economy, as a large proportion of their assets are invested in the UK economy, through equity holdings or bonds. Therefore, one of the main determinants on the actual amounts that UK individuals receive from private pensions, or the cost to UK employers of funding them, will be the UK’s economic performance.

Although we can look at the potential impacts around the margins of private pensions, the very big Brexit unknowns – such as the impact on the economy – are more important. In terms of the impact on how much people have as a pension, this is likely to swamp any other implications arising from the precise details of future regulation.

So for now it is still a case of wait and see before we can start to give a more definitive answer.

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