Brexit – Possible Pension Implications

August 25th, 2016

Whilst the detailed implications of Brexit for pensions are as yet unknown. This note brings together initial responses from relevant organisations.

Private Pensions

The Legal Framework

The design of pension systems is largely the responsibility of Member States. The regulatory framework at EU level covers:

  • establishing an internal market for funded occupational pension schemes and the minimum standards to protect scheme members;
  • minimum guarantees concerning accrued rights in occupational pension schemes in case of the insolvency of the sponsoring employer; and
  • anti-discrimination rules.

The Pension and Lifetime Savings Association (PLSA) explains that UK workplace pension schemes tend to operate on a national basis but want access to investment opportunities and service providers in the EU:

  • Workplace pension schemes in the UK are not generally looking to provide pensions to workers in other Member States. So, in this respect, there is little interest in taking up the opportunities that might – in theory at least – be provided by an effective EU-wide Single Market.
  • However, workplace pension schemes do want ready access to investment opportunities and service providers in EU and across the world, and this is where a strong Single Market has a role to play. Having ready access to the widest possible range of service providers helps schemes to invest their assets and administer their schemes with a minimum of cost in order to provide the best value to their members.

EU legislation has an impact on them:

  • directly, through pensions-specific EU legislation such as the Directive on Institutions for Occupational Retirement Provision (‘IORP Directive’), through the regulatory activities of EIOPA, and through EU employment law, such as the Equal Treatment Directive; and
  • indirectly, because the costs of complying with the EU’s investment markets legislation (such as EMIR, MIFID, the draft Money Market Funds Regulation and the potential Financial Transaction Tax) are passed to pension fund clients by asset managers, brokers and banks.

More detail about the legislation that currently applies is on the Europe and International section of the PLSA website.