It goes without saying that Brexit could have an impact on private investors. However, whether we get the soft Brexit Theresa May desires or end up with a hard Brexit, there will be a variety of different outcomes on the British economy and stock market.
Deciding how to protect your pension pot when there are so many potential outcomes can be extremely difficult. In black and white terms, one option could lose you money, the other could increase your savings. Given the number of different pensions available adds another spanner in the works.
Portfolio decisions
Uncertainty has been a buzz word for describing the entire Brexit process. What does ring true, however, is that we will not know the long-term impact on leaving the EU. The following predictions have been made by financial experts:
- The pound will fall.
- The UK equity market will experience a downturn.
- Foreign equity markets could also fall.
- Inflation could rise due to expensive imports.
- Government bonds could fall.
- The Bank of England could keep low interest rates.
The way in which you want to manage your pension portfolio in light of Brexit is very personal. Essentially, it boils down to how you believe the UK will be operating financially further down the line and how much you are willing to risk.
Those who have invested in their pension and can handle the unpredictable nature of Brexit and are willing to ride out a potential storm regardless of consequences could hang tight. Financial advisers are voicing that, given enough recovery time, your pension pot could go back into the green.
Those who are concerned about their pension pot not surviving Brexit could consider modifying their portfolio or opting to put investment capital into global assets. If any individual is unsure of what action to take regarding their investments or money they should consult a financial adviser.
State Pensions
Following Brexit those of retirement age in the UK will receive their state pension as normal. However, is this the same for the 220,000 expats located in EU countries?
UK citizens overseas will receive their state pension. The UK struck a deal with the European Economic Area (and other countries) to ensure this remained and that the state pension would also rise with the cost of living – 2.5%.
Private Pensions
Generally, the private pensions industry is very domestic. There are a handful of private schemes that work across borders, mostly the UK-Irish border, however. Therefore, any potential Brexit impact on private pensions will virtually no existent on the surface.
However, there is an elephant in the room. By far the potential largest impact on private pensions is from investment performance. This will be a primary result of the UK economy, but also the EU and the rest of the world too.
Expert opinion
If you have any issues around your personal finances or your pension, Brexit related or not, get advice from an independent financial adviser. They will be able to help you distinguish areas that could improve your financial standing and pension pot.