- The immediate impact for pensions of the UK's vote to leave the EU in a so-called Brexit referendum is in relation to market volatility and the effect this has on scheme funding. Sponsors of defined benefit (DB) schemes can expect trustees to focus on covenant depending on the circumstances of the sponsor and its involvement with other EU countries.
- There is no immediate impact on pensions legislation. While significant areas of UK pensions legislation originate from the EU, such as scheme specific funding requirements on DB schemes, transfers of undertakings and non-discrimination, as these provisions have been implemented into national law, they remain intact.
- Subject to exit terms, Brexit might allow the legislation to be changed going forward. However, as many of the current requirements are designed to protect members, large-scale repeal or reform may be unlikely.
- Brexit may mean that any changes under an updated draft Directive (for example, in relation to disclosure) currently under consideration would not need to be complied with.
- There is currently uncertainty in relation to the implementation of EU requirements for equalisation for guaranteed minimum pensions and it will therefore be interesting to see whether the Government will decide that schemes do not need to take action to comply with these requirements.
Read more: Brexit implications for occupational pensions schemes