Brexit Deal Failure could see UK pension deficits soar by a third

News over a Brexit deal or no deal has been dominating headlines for quite some time and has been spreading worry and concerns for many UK expats who have decided to expatriate themselves overseas for a better lifestyle or retirement.

Understand how this can affect your UK pension can be difficult to understand. UK defined pension schemes have been suffering from severely large deficits since interest rates have remained at records lows for a considerable amount of time. Low interest rates decrease bond yields which in turn increases deficits for UK defined benefit pension schemes. The FT have stated on the 11th December 2018 that deficits could increase by £219bn should we see a hard Brexit.

What does that mean for retirees with UK pensions?

Firstly, an increasing deficit for UK pension schemes means their liabilities increase. This has led to the bankruptcy for many large companies such as Carillion, BHS, British Steel and more. Should the company you hold your pension with go into liquidation, your pension will enter the “Pension Protection Fund”. You will lose percentage of your pension income immediately and in most cases the guaranteed increases will fall or be lost as well. Fortunately, this can be avoided which has been one of the reasons pension members have transferred away from these schemes over recent years.

Furthermore, members have also been enticed to transfer away from their defined benefit schemes over the past few years due to the significant increase in transfer values. Some members have received up to 40 or 50 times their defined income as a cash equivalent transfer value to transfer away. Although this can be very attractive for many member, for other members it may not.

Can I transfer away from my UK Pension Scheme?

If you have a UK pension and now live overseas, you have still options to transfer your pension away. In fact, you have potentially more beneficial options than a UK resident, although under regulation you need to receive FCA regulated advice in order to transfer away if your defined benefit scheme is valued at over £30,000. Based on recent statistics from the FT on the 13th December 2018, out of 48,248 clients who received advice on their defined benefit transfer since 2015, 24,919 members were recommended to transfer.

How do I get advice about my pension?

SJB Global remain at the forefront of the defined benefit transfer market for UK non-residents and can help you understand whether it is in your interest to transfer away from your defined benefit pension scheme or not.