Pension schemes well-prepared for the potential impact of Brexit | Pensions and Lifetime Savings Association

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Pension schemes well-prepared for the potential impact of Brexit

03 October 2019

•    Pension schemes have stepped up Brexit preparations significantly over the last 12 months
•    Nine out of 10 (88%) trustee boards have discussed impact of Brexit on their scheme 
•    Two-thirds (63%) have formally assessed Brexit risks

Nine out of 10 (88%) workplace pension fund trustee boards have discussed the potential impact of Brexit on their scheme (up from 63% in 2018), according to the latest survey by the Pensions and Lifetime Savings Association (PLSA).

Two-thirds (63%) of those surveyed have formally assessed Brexit risks (up from 26%) and three quarters (75%) said they have discussed the potential impact on their sponsoring employer (previously 61%).

In light of their assessment, more than half (55%) of workplace pension schemes have taken specific action to mitigate the risk of Brexit, compared to 28% last year.

The extra preparedness is reassuring news for 17.3 million active workplace pension savers in the UK, especially given fewer schemes this year than last year think Brexit will have a negative impact on their schemes, particularly if there is a deal.

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

Pension managers and trustees did express some concerns about how Brexit could impact their sponsoring employer’s ability to support the scheme; 45% agreed with the statement that leaving the EU will have a negative impact on their employer covenant.

One in five schemes (20%) said Brexit would result in additional administrative costs and complexity arising in their schemes, though 43% were more relaxed, disagreeing that costs would be affected. 

The top six actions pension schemes surveyed have taken to mitigate Brexit risks are: reviewed asset allocation, reviewed the employer covenant, reviewed currency hedging strategy, reviewed hedging strategy of non-currency risks, commissioned extra advice from professional advisers and changed asset allocation.

James Walsh, Head of Member Engagement, PLSA, said:

“The PLSA has been engaging with the Government and regulators to ensure they fully understand pension schemes’ perspective on Brexit. We have also recommended actions for pension scheme trustees to ensure their scheme is well placed to deal with Brexit.

“Our survey shows pension schemes have given a great deal of thought to the impact of Brexit on their operations and are well prepared. Savers should be reassured that their pensions are looked after.

“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. 

“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.”

Click here to read the PLSA’s top 10 Brexit actions for pensions scheme trustees.

ENDS

NOTES TO EDITORS
The PLSA surveyed a total of 71 pension schemes representing DB and DC funds. Responses came from pension managers/directors (42%), pension investment managers/directors (21%), trustees (17%) or chairs of trustee boards (14%). 

Mark Smith, Senior PR Manager
 020 7601 1726 |  [email protected]k

Steven Kennedy, PR Manager
 020 7601 1737 | 07713 073024 | [email protected]