At just over two months away from the end of the transition period, which will see the UK no longer bound by EU rules and regulations and no longer a member of the customs union and single market, there remains a significant amount of uncertainty surrounding whether an agreement regulating the UK's relationship with the EU will be reached. However, deal or no deal, what does this all mean from a pensions perspective?

Impact on legislation

It remains the case that, at least in the short term, the UK's departure from the EU is not expected to have a significant effect on the legislation and rules governing pension schemes in the UK (other than some minor technical amendments and the cessation of the cross-border pensions regime in the event of a 'no deal' withdrawal, which, according to the Pensions Regulator, would affect around 40 schemes in the UK). Any longer-term impact on the pensions legal framework will depend on how pensions policy develops and on any agreement on the UK’s future relationship with the EU.

Market volatility and scheme funding

A vital consideration for trustees is the possible financial impact of Brexit on their scheme. As has already been seen, Brexit and the process surrounding it can result in significant market volatility. Market volatility could result in changes to the value of scheme assets and returns on investments, as well as impact the schemes funding position, particularly in the short term. Trustees are likely to already have factored Brexit and the surrounding market volatility into their risk management strategy, however, trustees may wish to consider whether risk factors have changed as, although not inevitable, a no deal result looks to be increasingly likely, and take appropriate financial or actuarial advice if required.

Employer covenant

Trustees should already be monitoring the strength of their employer covenant and should consider the possible further impact of Brexit, noting that certain types of employer and certain sectors are potentially more vulnerable to market volatility than others. Trustees should consider early engagement with employers to better understand the steps they are taking in respect of Brexit and, in turn, to help identify, discuss and manage risks.

Pensions Regulator Guidance

In addition to guidance published last year for cross-border schemes in the event of a 'no deal' withdrawal, the Pensions Regulator has also produced short guidance notes for trustees of both defined benefit (DB) and defined contribution (DC) schemes on preparing their schemes for a future EU relationship. The guidance recommends that trustees should be focussing on the employer covenant (in relation to DB schemes) and investment, but also highlights operations and administration and member communications as issues trustees should be considering in the build up to Brexit.

We will continue to monitor the UK's withdrawal from the EU from a pensions perspective and provide further commentary on any developments as they arise.


Jennifer Crawford

Senior Associate

Laura Townsend

Trainee Solicitor