Pension schemes have been grappling with volatile markets in the run-up to and in the wake of the vote for Brexit. As the dust settles, we examine some of the wider issues for employers.
Employers with schemes based on members’ final salary, also known as defined benefit (DB) schemes, need to work with the scheme’s trustees to ensure their integrated risk management plans are up to date. This is an ongoing process under which scheme risk assessments should be carried out at regular intervals.
Employers using defined contribution (DC) schemes, where members are responsible for their investment choices, should review investment options, including default funds, to ensure these remain appropriate. They should also consider additional communications, reminding members of the importance of diversity in their portfolios.
For now, there is no change to the legislation governing pension schemes; UK rules derived from EU legislation will remain in place until any changes are made by the government and Parliament. But, depending on the exit option ultimately agreed between the UK and the EU, there may be longer-term considerations for employers, including equality legislation and data protection.
Protections for individuals against discrimination, such as age, sex or disability, stem from EU law. A wholesale move away from these would be seen as a retrograde step, and one the UK government is unlikely to choose. But there could be challenges to existing provisions, such as survivor benefits for same-sex spouses and civil partners. These are currently restricted to service from 5 December 2005 (6 April 1988 for contracted-out benefits). With Brexit now a reality, we could see fresh challenges for greater parity.
While the new General Data Protection Regulation, which will apply to Member States from May 2018, may not apply directly to the UK following its exit from the EU, it will remain relevant for pension schemes and employers, wherever data is transferred between the UK and the remaining EU Member States.
Georgina Beechinor is senior associate at Sackers