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Could the EU referendum affect your clients’ rates?

Next month’s referendum on whether Britain is to remain in the European Union is causing much debate and in some cases, concern, for many of the UK’s prospective retirees.

The subject of a possible ‘Brexit’ – or Britain’s exit from the European Union – has led to many experts across the industry making a number of forecasts and predictions.

If you have clients who are concerned how the pending referendum result could affect their retirement income, here are some predictions being made in the industry that you might want to consider.

Pensions and Investments

It has been forecasted by industry commentators that pension schemes are likely to be affected by the EU referendum, regardless of what the result turns out to be.

A Brexit result would give more freedom for the UK to make changes ourselves in the future, but how might investment markets and pension schemes in the UK and in Europe be affected?

With regards to scheme funding, returns on UK equities are predicted to lag behind their EU & global peers in the event of an exit vote. It has also been predicted that the pound will collapse by 20 per cent according to analysts at Goldman Sachs (although the Bank of England governor Mark Carney was quick to dismiss these claims) which could lead to increased short-term inflation.

This could be good or bad news for a scheme depending on where it was invested. According to pension actuaries and consultants, Spence and Partners, uncertainty may provide opportunities that pension schemes could take advantage of through careful monitoring of investments. 

When it comes to Money Purchase Schemes, it has been suggested that members of money purchase schemes may find that the value of their pot becomes volatile as the EU referendum approaches.

If gilt yields increase as they are expected to in the event of a Brexit, then those approaching retirement may be able to purchase more income with their pension pots. It will be key for clients with Defined Contribution schemes to seek the assistance of a specialist before making any decisions.

Of course, it is important to remember that forecasts are all that can be made at the moment and we will all have to wait and see if and what effects the result will have on rates.

In the meantime, clients wishing to lockin their annuity rate now ahead of the EU vote on June 23rd can take advantage of a free retirement options report from Retirement Line to see how much guaranteed income an annuity taken now could provide throughout their retirement.

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