The Pensions and Lifetime Savings Association has outlined three elements that are needed to ensure Brexit works well for pensions.

The statement follows a speech by Prime Minister Theresa May where she said that the UK will not remain in the single market upon leaving the European Union. However, she stated the UK will push for the “freest possible trade” with European countries and the final vote will be put to parliament.

The PLSA has said the UK needs a robust economy, the right regulation and a strong financial services sector in order for Brexit to work well for pensions. The economy is vital as good pensions depend on strong employer sponsors and an economic environment where employers and employees are able to make savings provision for the future, pension funds need a Brexit deal which minimises disruption to the economy. The PLSA welcomes the intention of setting up a transitional regime as this should help avoid an economic cliff-edge.

In terms of regulation, the PLSA noted that if, as a result of setting up an equivalence regime, Brexit results in UK pension funds remaining subject to EU regulation, it is important that UK-only pension schemes, which do not operate on a cross-border basis, are exempted from any future EU regulation regarding a solvency-based regime.

Finally, the third element of a strong financial services sector is crucial because to invest efficiently, pension funds benefit from access to the UK’s successful financial services sector. Therefore, the PLSA thinks it is important that such companies are able to continue using their ‘passports’ to do business in the EU single market.

Commenting PLSA director of external affairs Graham Vidler said: “A successful Brexit matters to the 20 million workers, savers and pensioners served by our pension schemes. If the economy weakens, it will make it harder for sponsoring employers to keep DB schemes open and reduce the funds individuals can afford to put into DC pensions – but these risks can be reduced if the government addresses the points we raise.

“We welcome Theresa May’s commitment to set up transitional arrangements to reduce any economic disruption due to leaving the single market. While it is not yet clear whether EU regulation, as a result of establishing equivalent rules for financial services, will encompass pension funds, we will be arguing strongly that EU rules on solvency requirements for DB pension funds should not apply to pension funds that only operate within the UK.”

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