Brexit: What does it mean for you?

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In the past months, a huge amount of thought has been dedicated to the possible implications of a vote to leave the European Union. In the wake of the referendum, we’re facing many uncertainties which will only become clearer in the coming months and years. While there are many questions that currently do not have answers, we are keen to provide our customers with facts where there are any, and reassure where possible.

In the next two years (or thereabouts), there will be detailed negotiations between the UK and the European Union, but it’s crucial that we remember that pensions are some of the longest term investments there are and many pension savers have a horizon which stretches far beyond the Brexit timeline.

Short Term Implications

Obviously, the most immediate impact on savings and investments has been, and may continue to be, the stock market reaction. With regards to pensions, if you are in a defined contribution scheme or personal pension, the value of your pension is based on where your funds are invested, so will be impacted if the markets you’re invested in go up or down. 

For those customers who are many years away from accessing their pension, it is the value when you retire that actually matters.  For those in this position, we would encourage you not to rush into any changes regarding saving for retirement. Knee-jerk reactions when markets fall can lock-in a loss, and mean you miss out if there’s a subsequent market rally. We urge you to seek advice from a professional financial adviser should you have any concerns.

For those people approaching retirement who face more immediate decisions, we would once again like to stress the importance of seeking professional advice. Customers who draw a regular income from a Flexible Drawdown plan may also wish to re-evaluate how much income they are taking in the short term, so that they can sustain it through their retirement. 

Long Term Implications

Looking forward, it is certain that we have a complex road ahead of us in working through the future of those aspects of financial services laws and regulation which are derived from the European Union. In many instances, laws or regulations set at EU level have been incorporated into UK law and will continue to be right for our citizens. There may be others where the UK Government and regulators may decide on a different approach in future.

Map of Europe with toy car

What’s not directly affected?

There are many aspects of pensions and savings that won’t be affected, or at least not directly. In the large part, rules around pensions and other tax-favoured savings products like ISAs are set by the UK Government. Aspects such as pension freedoms, the age at which you can access your pension, ISA limits and state pension ages and levels are not directly affected.

With an immediate emergency budget ruled out, it will be Autumn until we are likely to gain any insight into whether the UK Government plans any changes to the savings and pensions environment. The UK Government has said that it may need to reduce spending or increase taxes ahead of the election. The state pension triple lock was given as an example of something which might be unaffordable in future. We expect there will be lots of speculation, but it is hard to say at this point with any certainty what changes the Government might consider in future.

In the meantime, the financial sector as a whole will be calling for more clarity on whether plans to continue to advance initiatives such as the Lifetime ISA and the secondary annuity market will go ahead.

In the coming months, Aegon, together with the rest of our industry, will be monitoring all developments closely on behalf of our customers. This includes both those directly as a result of Brexit, and those the Government decided upon as an indirect result. In the meantime, our key message to pension savers is “don’t panic”.

To find out more about how Brexit might affect you, visit our FAQ page. 

By Steven Cameron 

Steven Cameron