Back to news 7 October 2016

Brexit - impact for UK pensions and RPF

We are unlikely to see major changes to the UK pension framework in the short or medium term following the referendum.

Longer term, the extent of any changes will depend on the form of the future relationship agreed between the UK and the EU. Given the UK's focus in recent years on measures to improve standards for workplace and personal pension schemes, it seems unlikely that existing protections for pension scheme members would be stripped away purely because of their original in EU law. The Finance Conduct Authority has confirmed (in a statement on 24 June 2016) that financial sector regulation, much of which is also derived from EU law, still applies and that the UK will continue with implementation plans for legislation that is still to come into effect. [text above from Sackers Quarterly Briefing - September 2016]

As we mentioned in the July edition of the 'Update' newsletter, we have conducted an assessment of the impact of the EU referendum result and subsequent market reaction on our investments. It is important to stress that it will take some time for the direct and indirect effects of the result to be fully reflected in markets and further volatility is likely. However, our initial assessment suggests that the direct impact on RPF has been relatively limited.

The following steps have helped to limit our exposure:

  • Because RPF is fully hedged against changes in interest rates and inflation, the funding position has not been affected by the sharp falls in UK Gilt yields observed since the result.
  • RPF has a modest amount of unhedged overseas currency exposure, which has been beneficial following the sharp fall in Sterling against other major currencies.
  • RPF has a well-diversified asset allocation and a number of our asset managers have outperformed wider falls in equity markets.

We are comfortable that our investment strategy is sufficiently robust to withstand the short-term volatility and market uncertainty arising from the referendum result.