Page 14 - BAA Digital Focus

Pension News
Brexit and your pensio
When the UK rst voted to leave the European Union (EU) there was an understandable urry of concern and discussion about what would it would mean for pensions. Almost one year, and one general election later, the
an immediate increase in the sterling value of overseas assets. The FTSE has also continued to rise, although most commentators expect this to atten out now that the UK election is over. The impact on funding levels has varied widely across DB schemes, depending on the investment portfolio and the level of hedging. Reduced gilt yields in ate liabilities, increasing de cits for DB schemes that had not hedged against the yield reduction. The Trustee determine their investment strategy after taking advice from a professional investment adviser. Their main objective is to
dTust has yet to settle.
he long-term impacts of leaving the EU are an unknown, not least because the terms and
technicalities of extricating ourselves are far from certain. However, we can observe the short-term effects of the vote and its immediate aftermath. The implications for your retirement savings depend on what type of pension you have and how close you are to needing them.
Our scheme
The amount of pension you will get from a nal salary, or De ned Bene t (DB) scheme, like the BAA Pension Scheme is not directly affected by stock market volatility. That means schemes of this nature were largely unaffected by the vote to the leave the EU and the market turmoil that followed. However, Brexit may well
n
home to more than 100,000 British pensioners, could leave people who cannot afford private treatment in limbo, if the Brexit negotiations fail to resolve this point.
State pension
The state pension triple lock, where state pensions are guaranteed to rise by the highest of price in ation, average earnings or 2.5 percent, may well come under pressure as a result of the Brexit negotiations. This was hinted at again during the UK election by PM Theresa May. This
is because the resulting additional pressure on our economy may well
maintain a portfolio of suitable assets of appropriate liquidity
Pensioners living in the UK or the EU will almost certainly continue to receive their BAA pension payments as normal.
which, together with future contributions, will generate investment returns to meet the bene ts payable from the Scheme. In order to achieve this objective,
tempt Government to nd savings. However, the payment of State pensions to those living in the EU should be maintained. The falling value of the pound in relation to
the Euro will mean that pensions in payment to those living in the EU will not ‘go as far’!
Pension savings that have a
direct investment element
It could be argued that pension scheme investments have already been affected by the Brexit vote.
This impact has not necessarily been negative – for example, the fall in the value of the pound has resulted in
the Trustee, over the course of the year, have reviewed their investment strategy and made changes as necessary.
We do not yet know what form
the UK’s exit from the EU will
take, or how much EU law the
UK government will choose, or be forced, to retain. However, there does seem to be a recognition that the guaranteeing of reciprocal member rights is in the wider interest, as is
the maintenance of existing nancial processes. We will have to wait and see.
put additional pressure on employers, who ultimately fund nal salary pensions. This is because this type
of pension is linked to the nancial health of the employer. If Brexit makes trading positions more dif cult - an impact on schemes may be felt. Our scheme is based on a contract between you and the employer. Whether or not the UK is a member of the EU will not alter this. This means that Pensioners living in the UK or the EU will almost certainly continue to receive their BAA pension payments as normal. However,
the lack of reciprocal healthcare agreements between the UK and EU countries such as Spain, which is
14 Focus - Summer 2017
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