Atkin trustees, actuaries, consultants & administrators

Brexit: what now for your pension scheme

Well, there we have it; the British people have voted to leave the EU and investment markets are reacting quite violently;

Equities: UK equity markets and the European stock markets have opened around 10% down. The US stock market also expected to open significantly down.

Gilt yields:10 year gilt yields immediately fell and could fall further, perhaps substantially, if the reaction to the vote is a move out of risky assets.

Sterling: a fall against the dollar of over 10% - the biggest fall for over 30 years. As a net importer, this is likely to result in prices increasing which could lead to higher inflation.

The investment commentaries that we have seen are suggesting that trustees should:

- not panic

- bear in mind that they are long term investors

- look for good opportunities to exploit volatility in markets

- review trigger points.

All sound advice but the latest buzz phrase is integrated risk management. As is often the case, attention seems to be focused on just one risk rather than looking at the overall picture. Of perhaps much greater importance to trustees will be the impact of Brexit on the sponsors of their schemes.

The outcome has been quite a shock and there will be a need for people to work out the implications and their reaction to what has happened. Investment markets tend to react as a result of sentiment and do not wait for anyone so immediate advice is sensible, even if it is largely to sit tight. However, perhaps, not immediately but over the coming weeks, trustees ought to get feedback from their scheme’s sponsor on the potential impact of the game changing choice that we have made. Companies may well be under considerable pressure and trustees should not seek to add that pressure; everyone will need to work together over what may be challenging times in the months and possibly years to come.

 

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We have worked with Atkin Trustees for many years on a wide range of cases and issues. They adopt a sensibly practical approach to trusteeship, focusing on outcomes for members. They’re also a nice bunch of people to work with.

Philip W Sutton, Partner, Squire Sanders (UK) LLP