Policy update - pensions exemption from clearing to continue post-Brexit
25 February 2019
Head of Membership Engagement James Walsh shares the good news that pensions exemption from clearing is set to continue post-Brexit.
You might have seen a report in today's Financial Times (paywall applies, but you can register for a single article) reporting that pension schemes will continue to be exempt from central clearing of their OTC derivatives trades after Brexit – regardless of what form Brexit actually takes. This will be welcome news for many PLSA members.
The news came in an official Government statement just hours after the PLSA raised the issue with FCA Chief Executive Andrew Bailey during a Brexit update briefing for financial services trade associations on Friday. Mr Bailey gave a very positive response and the PLSA urged his staff to confirm the news in a public statement, which has now been published.
The current legal basis for the exemption expired in August 2018 and regulators have been keeping it in place on an interim basis until the EU’s revised ‘EMIR’ regulation takes effect later this year. Many in the pensions industry have been asking whether the UK authorities would replicate the renewed exemption in the UK post-Brexit – especially if there is ‘no deal’.
Answering the PLSA’s question at Friday’s briefing, the FCA said:
- Their guiding principle is to keep the UK’s regime as close as possible to the EU’s. The emphasis is very much on continuity.
- UK pension schemes will continue to be exempt from clearing during the interim period.
- The exemption will then continue in the UK in parallel with the renewed EMIR rules once they take effect in the EU later in the year, although the precise steps the FCA will need to do to deliver that outcome will depend on what form Brexit takes.
The FT article quotes the PLSA: ‘It is good news for pension schemes that the UK Government has quickly followed Andrew Bailey’s comments with a public statement. This gives pension schemes certainty that they will still be exempt from central clearing obligations for derivatives, whatever kind of Brexit we get’.
More general guidance on Brexit and pension schemes is available in a recent statement from the Pensions Regulator.
Read our brexit to-do list: ten actions that trustees should take to ensure their scheme is well-placed to deal with Brexit.
For further information on the exemption and the EMIR legislation, please contact [email protected] or [email protected].