Post-Brexit issues for occupational pension schemes, especially defined benefit (DB) schemes, include the following:
This page was last updated in August 2022.
Cross-border schemes
UK legislation on cross-border schemes within the EU/EEA has been repealed, meaning that it now makes no difference whether an overseas worker is based inside or outside the EU/EEA and the additional funding requirement for UK DB schemes that include EU/EEA workers no longer applies. There may, however, now be issues in using an EU/EEA (e.g. Irish) scheme for the automatic enrolment of UK workers.
Economic effects
The economic effects of Brexit and ongoing tensions between the UK and the EU may have implications for pension schemes (and DB scheme sponsoring employers) as regards their asset values and (for DB schemes) actuarially assessed liabilities.
Employer covenant
The strength of the employer covenant may be affected, for example where trade with the EU has been impeded. Covenant informs decisions about funding and investment in DB pension schemes.
Guarantees
Trustees of DB pension schemes who have been given guarantees by companies resident in EU member states should consider the ease or otherwise of enforceability since Brexit.
Investment, etc.
Matters to be considered concerning pension scheme investment arrangements include: the need to update agreements; the ability of investment managers to discharge their mandate after Brexit (for example if they are impeded from accessing EU markets or trading venues); and the extent to which EU legislation, such as the margining and collateral requirements of EMIR, continues to affect UK pension schemes.
Scope for change
A good deal of UK pensions law derives from Europe, including legislation on equality, scheme funding, the Pension Protection Fund and other member protections. The treaty and directive requirements have been transposed into national legislation and therefore continue post-Brexit. Repeals of significant pensions legislation deriving from EU law are unlikely, certainly in the short to medium term.
Proposed changes to the Solvency II regime for insurers could, however, have an impact on the de-risking market for DB pension liabilities. Trustees of all schemes will also wish to keep an eye on expected changes to the UK's data protection legislation: read more here.
Tax treatment
The tax treatment of pension contributions, investment returns and benefits is not affected by Brexit. HMRC may find it easier to allow employers to reclaim VAT paid on their scheme's investment management fees but there has to date been no action in this regard.
