The UK – or at least part of it – will leave the EU. Who knows when, how, or what the consequences might be.
One thing is clear though: it is going to be costly for quite a while. Bound up with the wider economy as pensions inevitably is, we must hope the government prioritises damage limitation and cost control. Almost immediately after 23 June, gilt yields fell, defined benefit (DB) deficits rose and the bogey word ‘unsustainable’ gained greater currency.
Pension saving needs long-term assets and confidence. Cost control is not only about charge capping. Before politicians’ attention turns to making a bonfire of any UK pensions legislation – something we might all warm to – the focus must be on stabilisation. A plan for negotiations with the other 27 EU Member States would be a good start.
Can we retain access to the common market, as the EU was once known, without capitulating on freedom of movement? European Economic Area (EEA) membership means you cannot have one without the other (we are told). This will certainly test the government’s commitment to a strong economy.
Who knows whether that will work, or if we have to adopt European Free Trade Association (EFTA) membership as a ‘plan B’. In any case, it seems doubtful anything is going to be decided within two years. During this time, a host of costly new EU directives are due to arrive on our doorstep, including IORP II and MiFID II, as well as the General Data Protection Regulation (GDPR). All of which the UK government won’t be able to ignore.