Brexit may affect pension schemes

Thousands of Britons & Kiwis’ investments may suffer if Brexit helps cause an economic downturn.

One of the key elements in any kind of investment scheme is alertness – and around the world, millions of British expats are on high alert about Brexit.

That applies to the roughly 330,000 born-in-Britain New Zealanders, many of whom have UK pensions and whose savings could be affected if Brexit helps to spark an economic downturn in the UK.

Official data from the United Nations in 2014 revealed more than 313,000 Britons lived in New Zealand, and the number will have risen since then (about 7000 emigrated last year). The Brexit vote – Britain is due to leave the European Union in March, 2019 – caused a flood of interested inquiries regarding emigration to New Zealand.

Even if not all those eventuated, those Britons already in New Zealand but who have UK pensions still in their place of origin could find their savings affected by Brexit.

Most estimates say 80 per cent of people who have lived and worked in the UK have a private or company pension – and many of them have been transferring their pensions out of the UK to places like New Zealand. So what happens in the UK pensions market is of interest to many people – not just expat Britons but even Kiwis who have lived and worked in the UK on their OE.

The UK’s Minister for Pensions and Financial  Inclusion government, Guy Opperman, said last month  British citizens’ rights regarding pensions will remain unchanged, even in the event of a “no-deal” Brexit, which would see the UK crashing out of the EU (instead of a managed exit).

“The UK and EU have already agreed the terms of an implementation period lasting until the end of 2020,” Opperman said. “During this implementation period, access to one another’s markets will remain unchanged and on the current terms, ensuring continuity for consumers and businesses.”

However, one of the predominant themes of Brexit is economic uncertainty. Recent company collapses have affected trust that big company pensions schemes will deliver on their promises when examples like the Carillion and BhS collapses saw shareholders’ interests placed above pension holders.  

Meanwhile, a survey of private equity executives and debt investors, published in the Daily Express in February, predicted a recession would hit the UK by 2020, with Brexit as the main cause.

According to the survey, 56 per cent of private equity executives and 57 per cent of distressed debt investors said they expected a recession in the next two years. Managing director of Greenhill investment bank, Carlo Bosco, said: “It looks like the British economy is already suffering its effect with higher inflation, lower consumer spending, in particular around the Christmas trading period, and growth rates well below other developed economies.”

A partner from a UK private equity firm said in the report: “With political instability creeping up in the UK and the constantly changing situation in Europe, there are real chances of the UK seeing the beginning signs of recession early in 2019.”

However Gavin Dixon, chief executive  of Britannia Financial Services Ltd, perhaps New Zealand’s most experienced retirement planning and financial advice company specialising in transfers of UK pensions* says: “The problem is uncertainty. No one has ever been through anything like Brexit before and no one really knows what will happen and what effect, if any, it will have on the UK economy or other economies.”

*There are many “for” and “against” reasons for transferring a UK pension. For a list of pros and cons, and for more information, please go to: britanniafinancial.co.nz/uk-pension-transfer-benefits‍

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Originally published by New Zealand Herald: https://www.nzherald.co.nz/indepth/commercial/britannia-financial-services-brexit-impact/