No Deal Brexit looks like an increasingly likely reality as the EU and UK struggle to negotiate a deal before the transition period ends. While some sources speculate a Brexit deal is near completion, EU authorities have warned an agreement could still be thwarted at next week’s summit of European Union leaders. Both sides are urgently looking to compromise on a series of key areas, including fishing rights and competition rules, once Britain has officially left the bloc.
A no-deal Brexit is likely to have short-term, harmful impacts domestically, and one expert says pensions will not escape the damage.
Speaking to Express.co.uk, Chief Operating Officer at AHR Private Wealth, Marc Beattie said the impact of no-deal would be “profound” for pensioners.
Mr Beattie explained: “The impact of a no-deal Brexit on state and private pensions would be profound for savers, particularly those close to retirement.
“Most UK pension schemes have a larger domestic bias in their investments, meaning a potential market drop caused by a no-deal would see many savers’ pension pots lose significant value.”
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In order to make up these losses, Mr Beattie said some savers would be “inclined to increase the risk of their investments or face a potentially smaller savings pot to live on during their retirement years”.
The expert explained that the situation would be no different for Brits living and claiming their pension abroad.
As it stands, an estimated 5.5million Brits live abroad on a permanent basis.
That figure equates to an estimated one in every 10 people of the UK’s population, so the adverse effects on pensions would be felt throughout the world.
That, in turn, means the money goes in as a “foreign payment”, which Mr Beattie says causes “a currency conversion charge and limits their purchasing power”.
He continued: “Moreover, a no-deal Brexit could end the current form of the Qualifying Recognised Overseas Pension Scheme (QROPS) – something that many ex-pats use today.”
The QROPS system was first introduced in 2006 and enables people living abroad to continue saving for their pension fund by transferring their British pension to one based in their new country.
Mr Beattie explained: “QROPS allows non-UK residents to transfer their UK pensions into qualifying structures overseas, tax-free if they live in the European Economic Area.
“A no-deal Brexit could result in an additional tax on these transfers, meaning ex-pats would face higher charges to sign up to the scheme in retirement.”
However, on the other side of the coin, pensions would benefit greatly from a deal between the UK and EU.
Mr Beattie concluded: “In contrast, a Brexit deal would generate a significant uplift on the value of ex-pats’ pensions.
“Most UK ex-pats hold assets in pound sterling and its relative weakness over the past four years has been a significant financial burden.
“A deal could see a surge in the pound sterling by around 10 to 20 percent, which would ultimately help to boost the savings of retirees.”