Brexit

03 July 2016

The European Referendum Result - What does Brexit mean for my pension?

The recent result of the advisory referendum to “LEAVE” the EU surprised politicians and experts alike.

Markets reacted immediately to the news, with the pound falling to its lowest level against the US dollar in over 30 years and the FTSE 100 losing more than £100bn on the morning the results were declared. Although the London stock market has subsequently recovered worldwide markets remain unsettled.

The UK will have two years to negotiate exit terms from the time it gives formal notice of its decision to leave (by triggering Article 50 of the Lisbon Treaty). At the time of writing, we don’t know when this will be.

Members may be wondering what impact this will have on their Clarks pension and their retirement plans.

Of course at this early stage it is not possible to know the longer term impact on the UK economy, inflation, interest rates and investment returns.

If you have benefits in one of our defined contribution (DC) schemes (Plan 18, AVC’s or the Investment Section of the Clarks Flexible Pension Scheme), the immediate impact will be that the value of your pension savings may be much more volatile, depending on the mix of investment funds. There may be prolonged periods when the value of your pension savings is lower than before the referendum.

However, please remember that pensions are a long-term investment, so while values can go down, it is generally expected that investments will rise in value over the long term – even with dramatic falls such as those experienced in the aftermath of the referendum. You may remember that the FTSE 100 was at an even lower point in February 2016 (5500), but it had recovered back to over 6200 at the time of referendum.

For members of our defined benefit (DB) schemes (Plan 35 or the Pay Related section of the Clarks Flexible Pension Scheme), the impact will be on funding levels. Over the last 6 years, the Trustees have focused on diversifying the DB investments. As a result we are not so reliant on equities or so exposed to movements in inflation and interest rates.

The Trustees and their investment consultants will continue to monitor the situation closely.

  

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© Clarks Pensions 2014