James Walsh sets the PLSA’s three main concerns as the UK prepares to quit the EU
So now we know the government’s intentions for Brexit – in outline at least. Setting out a 12-point plan in a major set-piece speech at Lancaster House, Prime Minster Theresa May outlined her ambitions to control immigration from the European Union, cease membership of the single market and seek a bespoke UK-EU free trade agreement.
None of this will have come as a surprise to anyone who has followed the government’s Brexit statements closely. Perhaps the biggest news was the tone of the PM’s closing paragraphs, when she made it clear that “no deal for Britain is better than a bad deal for Britain”. In other words, the UK would rather trade with the EU on World Trade Organisation terms than sign up to a deal the government doesn’t like. It was tough talk at the start of what will undoubtedly be tense negotiations.
So much for the politics. The question from our perspective is what will a good Brexit deal look like for pension schemes?
A good Brexit deal matters hugely to 20 million workers, savers and pensioners
In its engagement with Whitehall policy-makers, the Pensions and Lifetime Savings Association (PLSA) has said that a good Brexit deal matters hugely to the 20 million workers, savers and pensioners served by the UK’s pension schemes. If the economy weakens, it will be harder for sponsoring employers to keep defined benefit pension schemes open and contributions into defined contribution pension schemes will be lower from employers and employees alike.
Responding to the PM’s speech, the PLSA highlighted three elements to ensuring Brexit works for pensions in the UK:
1. A robust economy: as good pensions depend on strong employer sponsors and an economic environment where employers and employees are able to make savings provision for the future, pension funds need a Brexit deal which minimises disruption to the economy. The PLSA welcomes the government’s plan for phased implementation of the new arrangements, as this should help avoid an economic ‘cliff edge’.
2. The right regulation: if, as a result of setting up an equivalence regime, Brexit results in UK pension funds remaining subject to some EU regulation, it is important that UK-only pension schemes, which do not operate on a cross-border basis, are exempted from any future EU a solvency-based regime.
3. A strong financial services sector: pension funds benefit from access to the UK’s successful financial services sector to help them invest efficiently. It is important that financial businesses are able to continue using their ‘passports’ to do business in the EU single market.
No one doubts that the talks will be difficult, very technical and highly political
The Prime Minister’s big Brexit speech provided a framework for the negotiations; the detail is all to come. No one doubts that the talks will be difficult, very technical and highly political. Throughout all this, the PLSA will continue to lobby the government to ensure the best possible Brexit deal for our pension scheme members and their savers.
James Walsh is EU and international policy lead at the PLSA