Brexit and Pensions: What to Expect - will brexit affect me financially?

How might brexit impact pensions, annuities etc?

Contrary to popular belief, the UK’s formal exit from the EU as of the 31st of January didn’t actually change a great deal. In fact, there remains just as much uncertainty today as there was several months (or even years) ago.

We know that the UK is definitely leaving – what we don’t know is how the country’s EU departure will affect us.
Retirement savers in particular are expressing concern with regard to how their state pension pots could be affected by Brexit. For the time being, there is little to no concrete information as very little has been formalised.

State Pensions

In any case, it is more than likely that UK state pensions will be impacted by Brexit – whether the impact is positive or negative remains to be seen.
Post-Brexit Pension Factors to Consider There is at least some relief for UK retirees living overseas, who may previously have lost out due to their 'frozen pensioner' status.

Everyone who lives in Britain and claims a state pension has the reassurance of a triple-lock, which guarantees annual payment increases that reflect the highest of price inflation, average wage growth or 2.5pc.

Uplift

To date, a similar ‘uplift’ has been provided by the government to cover retirees living in the EU, though there were fears this allowance would be halted after Brexit.
Since then, the government has confirmed that the current policy will continue for UK citizens living in the EU indefinitely. It will not be extended to those living further afield and the same rules will remain in place, irrespective of the outcome of Brexit.

Currency shifts

One of the biggest issues facing Brits living in the European Union is the potential for the value of the pound to shift wildly over the coming years. In the event that the value of the GBP falls against the Euro, it would have an immediate impact on the spending power of UK pensioners in the UK.

The more severe the fall, the bigger the impact for those affected. Economists have pointed out that any increase in the value of the GBP would have the opposite effect, increasing the spending power of retirees in the EU significantly.
For the time being, the problem lies in the fact that nobody really knows which way the GBP will head over the months and years to come.
Despite having seen generous gains in the immediate wake of the recent general election, the positive effects could be temporary at best. The biggest shifts in the value of the GBP are likely to come at the end of the agreed transition period, which currently has a deadline of December 31.

Regulatory changes

Britain currently has some of the tightest pension regulations in the world for the benefit of retirees. As it stands, a fair amount of legislation in the UK is either imposed or influenced by the EU.
When the UK ‘takes control of its own laws and legislation’ at the end of the transition period, the government will be free to act as it wishes.

In theory, this could lead to sweeping reforms regarding pension protections and retiree-focused legislation.
In practice, it’s most likely the government will continue to mirror the policy of the EU. Doing so would keep the same protections in place while saving a great deal of time and money drafting new pension policy.

A Bleak Outlook?

There’s growing optimism on all sides that the UK will (eventually) prosper after Brexit. Though it may follow an extensive period of turbulence, with the Office for Budget Responsibility having predicted that pensioners in the UK will lose out over the next five years.

Worse still, it is also possible that the government will once again increase the minimum state pension age to compensate for the effects of Brexit. In the event that migration is heavily restricted, UK citizens may have to work until they are in the mid-70s before gaining access to their pension pots.

Private Pensions

Whether the time has come to think about private pension opportunities remains to be seen. The issue at present being that those offering private pensions likewise have no real idea what to expect long-term from Brexit. Or for that matter, how things will play out when the transition period comes to an end as of January 1.

The appropriateness of private pensions varies wildly from one saver and policy to the next. It is therefore important to seek independent financial advice before making important decisions about your financial future.