At exactly 6.00 a.m. this morning it became mathematically
certain that the people of the UK had democratically chosen that it
should leave the European Union. The final results are now in: 17.4
million for Leave, 16.1 million for Remain.
The immediate reaction is that a stock market crash is in
progress as the markets had expected a Remain win and the currency
markets show a clear belief that the British economy will pay a
substantial price for the decision. UK traders are largely based in
London and may have judged the mood too locally (London had most of
the strongest pro-Remain areas).
Pension schemes are long-term savings vehicles and trustees and
sponsoring employers are unlikely to gain by a knee-jerk reaction.
Asset values are likely to fall in the short-term and there will be
increased uncertainty about interest rates and inflation. Those
with hedging investment strategies will have some protection.
In the medium term, schemes do need to deal with what happens
next. Some politicians are suggesting that the referendum result
will result in a re-negotiated deal with Brussels rather than an
actual exit, but that seems unlikely. A new referendum on
Scotland's relationship with England and Wales (or Europe) is a
In particular trustees need to understand the employer's
business plans and the impact on the sponsoring group's
covenant. Where support comes from a non-UK parent company in the
EU it will be important to monitor what politicians negotiate on
cross border enforceability of contractual obligations and local
advice in that company's jurisdiction will be needed in due
A number of investment vehicles used by pension schemes operate
under EU "passport" rules, such as funds based in Ireland
and Luxemburg. Schemes invested in these will need to monitor
political developments to see that they will still be permitted and
value for money (as punitive tariffs or trading taxes will make
Legally trustees must have an internal controls framework that
identifies risks and what the trustees can do to mitigate the
results of adverse events. Those will need review in the next few
months taking into account the scheme's employer(s) and
We are, of course, available to help with all your legal needs
and do contact us if you want to discuss what help we can
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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