Brexit: A Risk to Your Pension Income?

The negative economic impact of Brexit has been downgraded and the FTSE 100 has rallied - have pensions escaped unscathed too?

Emma Wall 26 July, 2016 | 4:32PM
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Voting to leave the European Union has not turned out to be the financial armageddon Project Fear threatened – yet. The International Monetary Fund has revised its growth forecast, but only downgraded GDP expectations for this year and next by 0.1%. The FTSE 100 after an initial steep fall has regained all its losses, and gone on to grow. The S&P 500 hit another all-time high last week and other global markets look stable. So what was all the fuss about?

It is important at this point to note it is still early days. Market volatility has increased significantly in the past two years – a product of this part of the cycle. After the great gains post the global recession, major indices have plateaued, with muted returns from developed markets in particular. While the S&P 500 and the FTSE 100 have rallied since the EU referendum result was announced on June 24, this does not necessarily mean this trajectory will continue. Nor are the IMF forecasts set in stone – history tells us GDP growth is only ever certain after the fact, and even post-year end they are often revised.

But let us assume that these gains stick, and the IMF growth forecast is accurate – does this mean that pension savers have dodged the Brexit bullet? Unfortunately not. There are other risks associated with the Brexit fall-out which could impact your retirement income. We list them below – remember forewarned is forearmed.

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About Author

Emma Wall  is former Senior International Editor for Morningstar