“The one group of people who could be affected by Brexit are UK citizens who have retired to EU countries and are in receipt of the state pension,” he notes.
“Currently their pensions are up-rated in line with UK policy, and while there is no indication this will be removed it will form part of the early stage negotiations between Brexit secretary David Davis and his EU counterparts.”
Threat of inflation
Uppermost in the minds of those who are nearing or at retirement age will be the sharp rise in inflation, which is likely to eat away at any savings and income.
Inflation hit 2.9 per cent in May, although it surprised many by dropping 0.3 percentage points to 2.6 per cent in June. This still puts it above the Bank of England’s 2 per cent inflation target.
Property bond provider Minerva Lending published research which suggests inflation is eroding savers’ cash accounts by £377 a second.
According to Ross Andrews, director at Minerva Lending, a saver with £5,000 held in the average instant access account will see its value slump £411 in real terms to £4,589 in that time.
Someone with £25,000 would see that sum shrink £2,055 in real terms to £22,945 in the same period.
Wouter Sturkenboom, senior investment strategist at Russell Investments, reasons: “To the extent Brexit has put downward pressure on the pound and gilt yields and upward pressure on inflation it has made life harder for pension funds. Funding ratios have taken a hit.
“At the same time, international investments that weren’t currency hedged have seen a boost. However, the former clearly outweighs the latter in the short term.”
He suggests in the long term the answer to the question, has the triggering of Article 50 and the ongoing negotiations increased the risks to pension savers, is a difficult one to answer.
“It will depend to a large extent on the outcome of the negotiations,” Mr Sturkenboom notes.
“Should the UK crash out of the EU it will certainly be a risk because of the negative impact this will likely have on growth.
"If, on the other hand, an exit agreement is reached and a trade deal can be concluded in a transition period the overall impact of Brexit on pensions might turn out to be quite limited.”
eleanor.duncan@ft.com
