Pension schemes have stepped up their Brexit preparations significantly over the last 12 months and are well-prepared for its potential impact, says the Pensions and Lifetime Savings Association (PLSA).

Nine out of 10 (88 per cent) workplace pension fund trustee boards have discussed the potential impact of Brexit on their scheme according to the latest survey by the PLSA — a significant jump from the 63 per cent who said they had done so in 2018.

Sixty-three per cent of those surveyed have formally assessed Brexit risks (up from 26 per cent last year) and 75 per cent said they have discussed the potential impact on their sponsoring employer, up by 14 per cent from 2018.

More than half (55 per cent) of workplace pension schemes have taken specific action to mitigate the risk of Brexit, compared to 28 per cent last year.

One in five schemes told the PLSA that Brexit would result in additional administrative costs and complexity, although 43 per cent were more relaxed, and said that costs would not be affected.

The survey has also revealed that pension schemes have taken six main precautions prior to the UK’s exit from the EU.

These were: reviewing and changing asset allocation; checking employer covenants; assessing currency hedging strategies and hedging of non-currency risks; and commissioning extra advice from professional advisers.

Pension schemes have also become less concerned about the effects of Brexit on their asset valuations.

Last year, 45 per cent of schemes thought that Brexit would have a negative impact on the value of their assets. This year, that figure had fallen to a third (33 per cent).

Pension managers and trustees did, however, express some concerns about how Brexit could impact their sponsoring employer’s ability to support their scheme, with 45 per cent saying that leaving the EU will have a negative impact on their employer covenant.

“When we talk to our members, we hear a range of views about the extent to which Brexit will affect them, but they mostly cluster around how much they think Brexit is likely to impact their sponsoring employer rather than the operations of the scheme itself,” said PLSA head of member engagement, James Walsh.

“This varies markedly depending on the nature of the business. For example some pension schemes with sponsors in the retail sector are worried that hold-ups at the ports could disrupt business and weaken the company, but others tell us their sponsors are confident that their supply chains will remain robust or that their business is entirely based in the UK and will remain stable.”

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