Now that the outcome of the Brexit vote is known and slowly but surely we are on the way out of the EU, there has been a whole host of questions put to our advisers.
The effect on pensions is, unsurprisingly, something that is worrying a lot of people so we’ve put together some Q’s & A’s that seem to cover most of what people have asked us so far.
Following our recent article – ‘How will Brexit affect my investments’ we have been inundated with further questions, if you have a question that isn’t answered here please email us on firstname.lastname@example.org with BREXIT QUESTION in the subject line. We will ensure you are answered personally and we will add your question and our answer to the list below – you won’t be identified of course but it could help someone else.
Brexit the current financial facts
Firstly we know that now the UK has decided to leave the EU, the UK Government will start a lengthy period of negotiation around the terms of our exit and also of future trade agreements with other EU members and countries outside the EU. The terms that can be agreed and the timescales involved will create some uncertainty but we have tried to look at the most likely outcomes and steer clear of the pre-referendum hysteria.
What is the “Triple Lock” that we are hearing about? Will we lose it and if so who will it affect?
The “triple lock” refers to a guarantee that the state pension will increase in payment each year, in line with the highest of (i) inflation, (ii) average earnings or (iii) 2.5%. It’s been a pillar of the Cameron years in government however if the costs prove too much and the economy weakens, then it could be cut. However the Triple Lock obviously benefits the retired, an important bloc of voters so it may prove politically difficult to remove.
Are there any immediate changes to my pension?
Most changes will not happen until after the negotiations are concluded – expected to be at least 2 years – many changes may not be agreed for considerably longer.
Will the decision to leave the EU affect the value of my pension?
Defined contribution or personal pensions that hold stock market investments have seen an immediate drop in value when the result was announced however there has been some recovery since. So how the investment markets respond short and long term is likely to affect the value of your pension.
We should expect that the stock market may continue to behave erratically in the coming months. You may see this reflected in your pension value which could go up or down. Longer term, the value of your pension fund is likely to depend on broader economic aspects and it’s difficult to predict this in advance.
If you are a teacher or in the NHS pension or one of the other Public Service pension schemes, you will know that the pensions are paid out by the Government and the value doesn’t depend on stock market valuations. Obviously the long term affordability of these pensions depends on the UK economy remaining strong but the short term reaction to Brexit isn’t going to affect these pensions.
How am I affected if I’m about to take money from my pension?
If you are planning to take money out of your pension or your investment fund in the immediate future, we recommend you seek advice from us as soon as possible.
How can Acumen help me?
Acumen clients have very diversified portfolios holding a wide range of investments matched to each client’s own individual attitude to risk. The more cautious the client, the less the swings in the stock market will affect the valuations. If you would like to know how we can protect our clients against this sort of volatility, please give us a call. It’s vitally important that investments match your requirements – whether that’s for income, capital growth, capital preservation or a combination of these.
Regular review meetings to keep you up to date
The vast majority of Acumen Financial Partnership clients have signed up for our regular review programme –regular meetings and updates to keep them up to date with what’s happening in the financial world, making sure the investments are up to scratch and that everything that needs to be done to keep the investments shipshape is dealt with.
How can I keep informed of developments?
Watch this space! We update our website regularly to help our clients keep up to date.