Update on Impact of the Referendum Result

Following the UK’s referendum vote on membership of the EU and the decision for the UK to withdraw its membership, as a member of the Defined Contribution (DC) section of the Plan, you may have questions about what it means for your future benefits.

The initial reaction of financial markets was one of significant volatility and it is expected that markets will continue to exhibit high volatility in the short term. It’s important to remember that pensions saving is a long-term journey and the Plan’s default strategy is a lifestyling approach designed to gradually lower the amount of investment risk as you approach retirement.

We think that it’s worth bearing in mind these points, depending on which part of your savings journey you are in:

  • If your retirement is not imminent then you still have time for markets to recover, if indeed they have fallen. In general, there may be plenty of bumps along the way, but it’s good to know that whenever there is a market dip, then the positive side is that you can potentially gain in the future because your regular contributions will be invested into markets at lower prices.
  • If you are approaching retirement in the next few years and you are invested in a lifestyle / lifecycle strategy, then your savings will be in lower risk assets compared to those members in their early years of saving. This is designed to insulate savings from market movements and it is expected that volatility of asset values will be more muted during this phase.
  • If your retirement is imminent (e.g. in the coming weeks or months), it is important to remember that any loss from a fall in the value of your investments is only incurred if benefits are crystallised. This means that decisions on switching, transferring and retiring should be taken carefully in times of significant market volatility like this. If you are in a lifestyle / lifecycle strategy, it is likely that you will hold a material proportion of your savings in lower risk assets – some of these asset classes have generated positive returns following the outcome of the referendum.  
  • As ever, the Trustee of the Plan, along with its advisors, will continue to monitor developments.

This communication is for information only.  It does not take into account your personal circumstances and does not constitute financial advice.  Neither the Trustees of the Plan or Hymans Robertson can provide you with advice; if you are unsure as to what action to take we strongly recommend that you seek independent financial advice.  For a list of Independent Financial Advisers in your area you can contact IFA Promotions on 0800 085 3250 or visit www.unbiased.co.uk.  Please be aware that you may be charged a fee for any advice.